How can I determine if a FHA loan refinance offer is from a reputable lender

Question

I'm getting semi-frequent advertisements in the mail for FHA streamline eligibility. The latest one (from a vender called "Intelliloan") seems like it could be a reasonable deal:

• 1%-2% lower interest
• "You pay NO Points, No Lender Feeds, and No Third Party Fees"

In the back of my mind though, I'm thinking there's got to be a huge catch that I'm overlooking.

So my question is this:

• How can I determine if a FHA loan refinance offer is from a reputable lender?
• Is there an FHA member program these organizations need to be a part of?
• Should I check better business bureau?
• Is there a lender review site that could provide more details on other people's experiences?

I'm wary of jumping into a scam but at the same time I don't want to potentially give up the opportunity to pay lower interest.

Answer 1

In my book if it comes in the mail with official looking envelopes, language and seals to try and get you to open it, the company isn't trust worthy enough for my business. I get a pile of these for my VA loan every week, I imagine FHA loans get similar junk mail.

Rates are very low at the moment so it is likely that rates from reputable lenders are 1 to 2% lower than say a year or 2 years ago.

In general if a lender gives you a GFE the numbers on it are going to be pretty accurate and there isn't a great deal of wiggle room for the lender so the concerns with reputation should focus on is this outfit some type of scam and then reviews on how good or bad their customer service is. Chances of running into a scam seem pretty low but the costs could be really high.

As far as checking if an unknown lender is any good it is kind of tough to do. There is a list of Lenders on HUD's site. Checking BBB can't hurt but I wouldn't put a lot of stock into their recommendations. Doing some general Google searches certainly can't hurt but aren't fool proof either.

Personally I would start by checking what prevailing rates are for your current situation. You could go to your proffered bank or to any number of online sites to get a couple of quotes.

Answer 2

Start with the list of mortgage companies approved to work in your area. There are 80 within 10 miles of my house, and more than 100 in my county. Pick ones you know because they are established businesses in your area, region, or even nationally. A good place to start might be with your current lender.

The risk you seem to be worried about is a scam or a trick. In the recent past the scams were ones where the home owner didn't understand teaser rates, and the risk of interest only and pick-your-payment loans. The simpler the bells and whistles, the less likely you are to be embarking on a risky transaction.

It can't hurt to ask an organization like the BBB or neighbors, but realize that many people loved their exotic mortgage until the moment it blew up in their face. So for 5 years your neighbor would have raved about their new mortgage until they discovered how underwater they were.

Regarding how smoothy the transaction is accomplished, is hard to predict. There is great variation in the quality of the loan officers, so a great company can have rookie employees. Unless you can get a recommendation for a specific employee it is hard know if your loan officer is going to give great service.

When getting a mortgage for a purchase, the biggest risk is getting a mortgage that results in a payment you can't afford. This is less of a risk with a refinance because you already have a mortgage and monthly payment. But keep in mind some of the monthly savings is due to stretching out the payments for another 30 years. Know what you are trying to do with the refinance because the streamlined ones cant be used for cash out.