Predatory Lending-who Can you Trust?

Predatory Lending-Who can you trust?

Everywhere you look these days you see negative impacts in the real estate market.

Rates are up. Home values are down. And to top it all off there are Lenders predicating on consumers. So who do you turn to? Who can you trust?

It?s more important than ever to become a knowledgeable consumer if you?re looking to purchase or refinance your home. There are a few things that you as a consumer need to consider before committing to any lending agreement.

First be aware of your rights. Learn the basics of mortgage lending so you’ll know when you’re being charged too much for a loan or for things you don’t need. There are a variety of websites that will give you information regarding laws pertaining to mortgage lending. Yes, lending is regulated by the government. The Real Estate Settlement Procedures Act (RESPA) is a HUD consumer protection statute designed to allow homebuyers to become knowledgeable and aware of closing costs and settlement procedures. It requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services.

Next be aware of your expectations and limitations. How much can you afford? Can you afford to pay for an appraisal, or closing costs? Incidentally, don?t believe ?No closing cost loan? ads. There is no such thing as a free lunch. You will pay up-front fees, or you will pay the bank in the back with higher interest rates. The longer you are in the loan, the more money you will pay.

Make sure you’re comfortable with your loan payment, because you’ll be paying that amount for many years. What do you anticipate your financial situation will be in the coming years? Will you be retiring, or will you be making more money? Will you be supporting your child?s college education? Consider your future concerns and goals.

Also, you it is imperative you find out who you are doing business with. Can you trust them? Are they licensed? How big is their office? Are you just another borrower among thousands, or are you a client that is recognized as a person with individual needs and concerns? Why are they in this financing industry? What are there ethics? After you’ve found a couple whose reputations appear to be outstanding visit their websites because in addition to wanting a reputable company, you also want an affordable company. You should not feel pressured or uncomfortable when speaking to a lender. If you do, it might be your gut telling you that something isn’t right. If so, just walk away. Move on to the next lender. They should be willing to work with you to help you find the best loan for you and your situation.

Be aware that predatory lenders typically target what?s known as the nonprime mortgage market. These are people with not-so-perfect credit. One predatory lending practice is loan flipping, in which the borrower is forced to refinance a loan, sometimes several times. The purpose of this is that it generates new fees for the lending institution. Another common practice is the bait0and-switch. The lender will tell you the terms and rate, you are agreeable and sign the documents, but when you come to the closing, the rate and terms have changed and you are left to believe that it is too late to back out. But fortunately, the Federal Truth in Lending Act is a safeguard for those who refinance a loan on their primary residence. This Act guarantees borrowers the “right of rescission,” meaning they can cancel the debt within 3 days of closing.

The bottom line is that there are lending institutions that make a great deal of money by charging extra fees to those borrowers who can?t afford them. This will either deprive certain borrowers of the American dream of home ownership or, worse yet, set them up for eventual foreclosure.

A good Mortgage Specialist will take time to explain things in detail. The bottom line is making sure that you feel comfortable with and informed on the terms of the loan. Ask for options, and comparisons so that you can choose what loan you feel would best suit you.

Good Luck!