I have to be perfectly honest. We all have AHA moments, some are clearer than others but nevertheless, we get them. Today was one of those days that an AHA moment was very clear when it came to me today.
I was outside my office building, taking a cigarette break (yes, one of the habits I am hoping to eventually quit!) when all of a sudden, I realized how we are placed in situations to discover things we would have never discovered if we didn't take chances.
I recently applied for a loan by trying to refinance my home in order to get my kitchen remodelled and pay off a few things. It looked great on paper when I planned it so I went ahead and applied at Lendingtree.com - - like they say, when banks compete - - you win. Well, I thought I won. After a gruesome number-crunching and speaking with the lenders, weighing pros and cons, I decided to go with one lender which will remain unnamed. The offer was so convincing that I have actually forgone the lenders whose offers made more sense. The sales talk was prime and she could have sold me sand in Dubai and I would have bought it. She sold me to a thought of paying a FEE to lock-in a rate (the pitch is that interest rates are rising and would be better to lock in before it goes up - - the fee, $595.00) with a condition that should I not accept the terms of the contract, it will be refunded in full. Quite safe right? In short, I went with the offer given the good faith estimate of my home. I saw the offer, with all the details and it showed that I will get a substantial amount in cash back to be able to cover my remodelling expenses and then some. I tried to read the multi page contract in detail before signing anything. The offer made was prior to the appraisal being completed and therefore going by a fictitious figure of how much my home is worth. It all made sense at the time, so I signed and returned it.
A schedule for closing was made even before I saw the final figures after the appraisal was done. I had to ask the lender what the figures were (post appraisal) in order to make my final decision. When the final figures were returned to me, the cash back was much lower than I expected which would not be sufficient to complete my kitchen project and paying off debts that had me consider the refinance in the first place. I declined and said that the offer is not good because of the reason I just stated. I politely asked when I could get my $595.00 back. I was told, "Unfortunately, you cannot get the amount back. Do you know how many people worked on your loan? We had to rush to get you processed as soon as possible!". Hold on a second, didn't I "conditionally" pay for a lock-in fee that would be refundable if the terms are not accepted? "You signed the papers, it's clear in black and white - you are not getting your money back!", she said. What was that again, "people that worked on my loan" - - is that what a rate lock-in fee was for??
I may not be as savvy as I would like to be when it comes to understanding contracts. It is a blessing that at the current time, I am enrolled at a community college trying to obtain credits for my bachelor's degree, and the topic is about "CONTRACTS". In order to have a VALID contract, there must be an offer and an acceptance. There should be what we call "mutual assent" or meeting of the minds. Once the acceptance is made, the contract will be considered valid PROVIDED there was no counteroffer made. If for example, I tried to sell you a car for $500.00, as-is, and you accepted - there is a contract. If you said to me, I will buy it for $300.00, as-is - it nullifies the original offer of $500.00. Therefore, the original contract dies and cannot be made valid.
If the lender had offered me terms based on a fictitious figure, and then comes back with the actual figures - - that would have constituted a counteroffer. Therefore, the papers that I signed and returned to them is considered NULL and VOID. The new offer would have been the documents that I would sign at the time of closing. I respectfully cancelled the closing as the terms were not agreeable to me. There was no "meeting of the minds".
I contacted my credit card to put a dispute on the amount and would gladly offer back up documents to support my claim. On top of this, I consulted with my professor who confirmed that because there was a change in "PRICE", the original offer is NULL and VOID and that I have every leg to stand on should I try to dispute the charge.
There are certain things that I learned today.
1) Never give out your credit card number to someone who is eager to get your number than to get your loan approved and completed.
2) There is no such thing as a rate lock-in fee. If there is, you should find out more about it before you pay for it.
3) Do not sign any documentation for a refinance WITHOUT the completed appraisal amount of your home.
4) Always always always read the fine print. (By the way, there is a law that disclaimers must be written in bold, readable, and conspicuous on any document. If this is not the case, do not sign anything).
If the lender was watching out for my own benefit, why would they charge me 4K in closing costs and tell me that I am saving money by refinancing?
So - what's the AHA moment? Knowledge is power. If I had researched way before I signed anything, I will not be in this predicament.
NOW, I will try my damndest to post anything here that has to do with finances. Whether it be interest rates, refinancing your home, saving dollars, penny pinching... I will research everything on the internet that would be of some benefit to anyone of you that might fall into the trap that I was almost got caught into. Keep an eye on this blog - - I will be back with a vengeance.
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