Thursday, October 15, 2015

How to recognize a predatory lender and what to do about it

For consumers it is sometimes difficult to differentiate between honest and ethical business people and those that should never be trusted. Sometimes we find out the hard way but obtaining a home loan is one endeavor that you don’t want to leave to chance.

The huge majority of mortgage lenders are honest, hard working people just like you and I and their ethics are not in question. There is, however, a small minority of lenders that are more than willing to take advantage of the na├»ve and uninformed. You wouldn’t buy a Rolex watch from a stranger in the mall and the same should apply to choosing a lender when obtaining a home mortgage.

Responding to a flyer on the windshield of your car, direct mail from a company that you’ve never heard of or a telemarketer might not be the best way to find a reputable lender. Indeed, a better method of choosing a lender might be a referral from a friend or family member or your real estate agent.

Here are some warning signs that your lender may not be as honest and forthright as you had hoped:

The interest rates and associated fees are higher than most other lenders charge. This is a bad sign from the beginning and should be an indicator that you are dealing with a less than ethical lender.

The lender states that bad credit is not a problem. This is never true. Sub-prime lenders may be able to help you if your credit is not good but this is not always the case and in any event the interest rate will probably be quite high.

You are being pressured to sign NOW. A reputable lender does not need to pressure people in order to get their business. Now is a good time to leave and look elsewhere.

If the lender asks you to lie on your application, THIS IS A BIG RED FLAG! It is ILLEGAL to provide false information on a loan application or any related paperwork. Don’t do it and find another lender.

The lender wants you to make a larger loan than is required to buy the home. This can be very tempting to someone that has a lot of other debts such as credit cards, car loans etc. but it is not always a good idea. Do you really want to make a higher mortgage payment every month? I can’t say that this is not a valid choice for certain people but if the lender is trying to pressure you into doing it, he/she is looking out for their best interests, not yours.

The lender is trying to convince you that no one else would be willing to lend to you. This is completely untrue. All lenders use the same general guidelines to determine if you are eligible for a home loan. If you are approved by one lender you can be approved by several. This is nothing more than a desperate attempt to get your business. Be sure to check with other lenders before signing anything and check your credit report to ensure that there are no errors that need to be remedied.  

There are excess fees and charges at closing that you were not made aware of beforehand. If this happens to you, ASK WHY! While there can be some minor adjustments made at closing that may differ slightly from the estimated costs you were originally provided with, there shouldn’t be a huge difference. If you suddenly discover that you are paying much more at the closing table than you were previously told something is wrong. If you aren’t satisfied with the explanation leave the table and contact a lawyer immediately. Unscrupulous lenders often use inflated and bogus fees at the time of closing to charge you more money.

If you suspect that a lender is unethical or involved in something that is illegal you should report them to local authorities immediately. Remember, even if you are clever enough to walk away some people are not and you will be doing everyone a big favor by taking action against a predatory lender.

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