Beware of Predatory Mortgage Lenders
There are hundreds of mortgage companies out there that are begging to
show you the miraculous deals that they have waiting just for you. Unfortunately,
these offers are generally too good to be true.
You may have had trouble working with some mortgage companies and you may think that you do not have many options available to you. As the previous article on page 3 mentioned, there are many legitimate choices still available to you. Before you sign on the dotted line look for some of these warning signs that many predatory lending groups employ.
They may offer to use their own appraiser. This appraiser may have an incentive to appraise the house higher than it's actual value. It is always helpful to have a suggestion, but it is a good idea for you to hire your own appraiser from a source that you trust. If your house is the same size and build of other homes in the neighborhood then it should be in the same price range. Appraisals should include some prices of surrounding homes in your neighborhood.
You may come across a lender who is very eager to assist you. They may promise you that they can get you a better deal if you are willing to “adjust” your income. They may ask you to give false information when you fill out your application forms. You should never lie about your income or assets.
Some lenders may also encourage you to apply for a loan that exceeds what you can comfortably afford. You should know beforehand how much you could afford on a monthly mortgage payment. Just because they can get you approved for a higher loan doesn’t mean that you should take advantage of it.
Another practice of predatory lenders is to nickel and dime you with fees. Some fees that they charge are non-existent and they are just hoping that you don't pay attention to the forms. We have all been told to read everything before we sign anything. If you see a charge that you don't understand, have them explain it to you. If you still don't understand it or think that it is suspicious, hold off on signing anything. If there are charges for services that you did not receive make sure that you bring it to their attention and ask that they be removed.
Some lenders will even charge higher rates to people based on their national origin and/or race. This type of discrimination can happen too often and is hard to prove.
You don't want to sign any forms that are blank or have blank areas in them that could be filled in later with different information. Some lenders may even tell you that you do not need any copies of the forms you are signing. You need to ask in advance that you receive copies of all papers that you sign. Another warning sign is if you notice that some of the conditions have changed since you first discussed the arrangements.
It is easy for predatory lenders to intimidate you. They may intentionally speak in terms that you may not understand so they can convince you that everything is OK. The same goes for forms you may not understand. Make sure they explain them to you and don't use the excuse “You don't need to read that, it's just a bunch of legal jargon.”
If you look for some of these warning signs you can avoid falling prey to a bad mortgage lender. Buying a home is the American dream and should be something that makes you happy for a long time. When you are taken advantage of it can turn into a nightmare that lasts a very long time.
www.bbb.org - Website for the Better Business Bureau, where you can search for the lenders by name to find how well they treat their clients.
www.ftc.gov - Website for the Federal Trade Commission, where they feature all of the latest news on potential scams that may harm consumers.
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