Credit Application Fees: What Should Applying for a Loan Cost?
The Difference Between Credit App Fees and Home Deposits
A practice throughout traditional mobile home dealerships is to require a “bank application fee” from potential home buyers in order to submit their information to a lender that may or may not approve them for a loan.
There are many, many banks in this country and, quite honestly, we’ve never come across one that takes money for simply reviewing an applicant’s information and finance history.
That’s not to say that loans are free, but we’ll get into that more in a moment.
Another custom, completely different than that of a bank or credit application fee, is what is referred to as a “deposit”, and in this blog we’ll look more closely at these terms and discuss where caution should be taken versus what may be a reasonable request from a mobile home dealership.
Bank or Credit Application Fee
As I mentioned above, a bank application fee is often conveyed to a potential home buyer as a bank required cost before their initial credit application will be reviewed for approval.
Unfortunately, however, what this fee really does is build a sense of obligation from the customer to the dealership they’ve already invested money into. A customer will naturally feel uneasy about shopping around anywhere else because they cannot afford to continue paying dealerships to assist them with the approval process. And they will often settle for a less than ideal customer experience because of the $50, $100, maybe even $300 they’ve put into what is in all actuality a free bank service.
Just in case I haven’t been yet, I’ll be very clear here: banks do not require an application fee. You do not have to pay for a credit application. If you come across a dealership who claims they cannot help you submit an application without money up front, I would be extremely cautious.
On the Other Hand, Loans are not Free
Just to clarify, banks do charge for the loan process—once the loan is finalized. This is called an “origination” fee and it can either be a flat rate or a percentage. This will be indicated on the approval letter and is rolled into your total loan.
But, the bank only receives their money if the whole process is completed and you actually go through with the home purchase.
In addition, loans include an interest rate, which is money you pay over the duration of your loan in each mortgage payment. Read more about interest rates here.
What is a Deposit?
Separate from the (non-existent) credit application fee is something known as a deposit.
A deposit is often asked of a home buyer who is wanting a stock model home. Meaning, they don’t have to wait for the home to be built at the factory and are instead choosing to buy a home off the dealership’s lot.
In this instance, a deposit could be requested as a show of “good faith” on the part of the home buyer to follow through with their purchase. Because another home buyer might want the same stock model, offering a deposit demonstrates your personal investment in that home.
Deposits might also be requested from a dealership in order to “lock in” the price quoted to you by the sales representative. While we here at Braustin understand that practice to an extent, we guarantee your price based on what you were quoted upon approval of your home loan and the show of good faith in submitting loan documentation within a reasonable timeframe.
Your deposit should always be used toward your total down payment and should not be an additional cost.
Now, here are a few tips for making a responsible deposit to reserve a stock model home:
- Always get a receipt for the deposit, dated and signed by your sales rep.
- Do not place a deposit before seeing the results of your site inspection and ensuring a mobile home is well suited to your property.
- In addition to a receipt, ask for a purchase agreement itemizing estimated costs and the agreed upon home and upgrades prices.
- Know that deposits cannot legally be kept by a dealership if you choose not to follow through with the purchase.
Always, Always, Always Read Reviews
Although Texas law requires mobile home dealerships to refund deposit money, actually getting the money back can sometimes be frustratingly difficult.
The best place to learn about any company’s trustworthiness is by reading the reviews of its customers.
If you see a lot of reviews discussing the difficulty of getting deposit money back, poor customer service, or unfulfilled promises, then heed the warnings!
By no means do we claim Braustin is the only place to offer a positive experience when buying a mobile home, our goal is to arm home buyers with essential knowledge to make an informed and confident buying decision.