Reading the small print.

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In the lawsuit-crazy world that we live in, ‘small-print’ has become a necessary evil.  Originally ‘small-print’ only existed on unusually longer-than-normal-papered car contracts and on the back of credit card statements, but now it is everywhere.  On every store receipt, on most consumer electronics, even on the lids of our coffee, for crying out loud.  There are now entire ‘small print’ booklets that consumers receive included with monthly bills, account statements, etc.  Just yesterday, with my cell phone bill, I received a seven-page ‘small print’ brochure outlining my improved rights as a customer.  Good information? . . . possibly . . . time in the day to read it? . . . not so much.

On television, the ‘small print’ is just plain silly.  For mortgage commercials, when they advertise “NO lender fees” and “NO closing costs” and the like, the small print is so small (and the screen-shot lasts for only a second or two) that no could possibly read what it says.  I actually have trouble focusing on the real purpose and product of most commercials because of the small print.  It always makes me laugh to read what some companies will put down there, “professional driver. closed course. do not attempt.”  Yeah, thanks.  I kinda gathered that as the car raced down a runway, backwards at 70 miles per hour, trying to make itself hydroplane.  The newest automobile ad ‘small print’ that I have seen deserves some recognition.  I told my wife that I might go test-drive the car, just on account of the ‘small print’ making me laugh so hard.  In the new Ford Edge commercial, the new small-size crossover car is driving through a busy city with one wheel on the top of skyscrapers and one wheel floating in space high above the city, and the small print reads (roughly), “Yes.  This is a fantasy.  Cars cannot drive on the edge of buildings.”  ha!  hilarious!

Thankfully, in the normal course of the mortgage business, there is not a lot of small print — although builder-required sales contracts are sometimes full of small print (some specific to the mortgage financing).  If you are the kind of person that would actually read all seven pages of the cell phone companies “Important Consumer Information” pamphlet, then for your mortgage-closing (and for the sake of your Realtor, the seller, the closing attorney, and the people in the lobby who would like to start their closing on time), I would recommend requesting a copy of your closing documents to review prior to your closing.  Some lenders will not release copies of your exact documents prior to closing, but most should be willing and able to provide you with copies of the template-type forms that you will be required to sign at closing.

A good friend of mine is a closing attorney and he tells a interesting story.  At a closing, the purchaser was reading one of the forms (regular size print, I think) and she was not happy with the title of the form, nor the information in it.  The title of the form read, “Waiver of Borrower’s Rights.”  Like most forms in a mortgage-closing package, this form is standard (and required) for a Georgia closing.  Because Georgia is a non-judicial foreclosure state, banks and mortgage companies are not required to take consumers to court prior to starting the foreclosure process (there is a process that they are required to follow, they just don’t have to sue the consumer and take them to trial — they can force the sale of the property in order to payoff the lien).  As part of that arrangement, consumers sign an addendum to their security deed waiving their Constitutional right to a “. . . speedy and public trial, by an impartial jury . . . ”  This (potential) borrower refused to sign the form (for a short-period of time); to which my friend politely replied, “Ma’m, I have no intentions on making anyone sign anything that they don’t want to sign.  However, if you want the money that the lender is providing to you in your loan, I am required to have you sign that form.”

If you do see small print at closing, it is likely on a form that you are required to sign as part of obtaining the loan . . . although there are a few ‘small print’ things to look for when closing on a mortgage:

1. Check your interest rate.  If the interest rate is different than what you were told or promised, stop the closing and don’t continue until you receive a satisfactory explanation (or correction).

2. Double-check to see if the loan has a prepayment penalty (found on the Truth-In-Lending); most “A” credit first mortgages do not have a prepayment penalty.  If your credit rating is low, your loan may contain a prepayment penalty in exchange for a lower interest rate (sometimes a good thing).

3. Make sure that the fees on your closing statement match (or are very similar) to the numbers that you were given on the good faith estimate.

4.  Make sure your cash-to-close is correct.  Your bottom-line “cash required for closing” should be within $100 to $200 of what you anticipated and what you were told by your mortgage originator (sometimes prepaid expenses, homeowner’s association initiation fees, small changes in settlement fees, etc. can make your actual figure slightly higher than even the best estimates).

5.  Less trust = more reading.  If you don’t fully trust the person that you are working with to get your mortgage (especially if you found them randomly through the newspaper, telemarketer, etc.) then you should probably read every word of every page to make sure that you are getting the ‘deal’ that you were promised.

The views of this post are the personal views of Jeffrey Pinkerton, Mortgage Consultant, and should not be relied on as legal advice or legal counsel.  Please understand that this post contains some information concerning how to best protect oneself through the mortgage paperwork process, but the views here are in no way inclusive of everything a consumer should look for or be aware of when comitting to a mortgage loan.  Mr. Pinkerton recommends that all consumers who are obtaining a mortgage in the state of Georgia either to purchase a home or to refinance a current loan, contact him prior to finalizing the details of their financing.   

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2 Responses to “Reading the small print.”

  1. Jake Wray Says:

    I like the small print at the end of your small print blog……

  2. More on small print . . . « The Mortgage Blog Says:

    […] know that I have already posted on the small print of the mortgage business and about some of the ridiculous things you will see in TV mortgage […]

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