If you are prone to getting ripped off, scammed, or taken in when it comes to the other avenues in life, expect a mortgage to be no different--unless you prepare and do your homework. Tighter mortgage regulations and state lending laws have made it more difficult for loan officers to take you for a ride, but it's still possible. So here are a few things to look for and a few pitfalls to avoid when getting a mortgage.

1. Do Not Focus Solely on Rate or up Front Fees  

When I was a brokerage owner, it was not uncommon to see someone come in with an advertisement from Ditech or another mortgage company, touting an absurdly low rate or a no-fee loan. If we couldn't match or beat what was in the ad, they simply would get the loan done with the company from the ad. Weeks later, we would see the same people come in, wanting to know how to get out of the loan. What went wrong?

In simple terms, they were had.  Loans are like see-saws--on one side of the see-saw you have a rate, and on the other you have the fees. When one side goes down the other compensates by going up. So, a loan with a rate of 5%, when the going rate is 6%, will have extremely high up-front fees. The super low rate is merely a mechanism to lure people in. The same goes for a loan with $0 closing costs.  The part where they get you is with a higher-than-average rate and make their money in Yield Spread Premium.

What you'll want to have is a solid understanding of what rates are being charged and you can act accordingly.

2.     Make Sure to Get a Good Faith Estimate

More acurately, make sure to get a good faith estimate (GFE) and let the loan officer know in no uncertain terms that if the final loan numbers deviate from the GFE, you will walk away from the closing table. A good faith estimate not only puts in writing what the loan officer is telling you, but also gives you something to take to a competing loan officer. Unfortunately, a loan officer is not bound to stick to the terms of a GFE, so it is imperative to let them know that you are unafraid to go somewhere else if they try to the old bait-and-switch. 

3.     Educate Yourself

When going a loan and overly trusting a loan officer, or not pushing back on occasion, will more often than not have you paying more for a loan than you need to. Read Mortgage for Dummies or any other literature that will provide you with a definite understanding of the subject matter, or ask questions here at Bankapedia. The more knowledgeable you are, the more confident you'll appear, and the better you will get treated. Definitely get to know the type of loan that works best for you, don't just take the loan officers word for it. Their interests are selfish just as yours are. They want to make as much money off of you and still have you refer them to a friend. 

Hope those short simple suggestions help.