by Alden Smith
Fnding a lender that is ethical, up front with you on terms and conditions, and moves quickly to insure your loan is processed in a timely manner can be a frustrating task. This is especially true if your credit is less than perfect. In today's market, many unethical lenders are a real threat to prospective home buyers. Knowing what to look for and what to avoid is the focus of this article.
Because the national real estate market is slowing down at a significant rate, lenders are getting a bit hard up for business. It is not uncommon for unethical lenders to approve loans for people that they know will fail, and face foreclosure. People that in the past could not qualify for a loan are finding that suddenly a loan is available. This is of course being done to affect one thing - the bottom line. Although these practices are unethical, many states do not regulate the lending institutions to a high degree, and many lenders use this to their advantage.
Your best line of defense is always to be sure that you can handle the payment on any loan you may pursue. In this day and age people have no excuse for not obtaining this information. Many online mortgage companies have mortgage calculators that help the borrower to determine if a loan is the best thing for them. These calculators take into account nearly everything you might need to know in qualifying for a loan. Use them to your advantages.
The process of weeding out unscrupulous lenders is an easy one. Here are warning signs to identify an unethical lender:
* When applying for a loan, a mortgage broker may tell you that his fee will be one set amount, when in reality it is much higher. This amount will be listed in the Good Faith Estimate. When the home buyer goes to the closing table, he finds that the mortgage broker's fee is much higher than previously reported.
* Although the lender may know you do not qualify for a certain type of loan, they will proceed anyway. An example of this might be the consumer seeking a fixed rate loan with no pre-payment penalties. When he arrives at the closing table, he finds that the loan is a variable rate loan with prepayment penalties.
* An unscrupulous lender may inflate the actual debt to income rating of the consumer to make it appear that he qualifies. The W-2 statement may be altered to show higher income. This is done without the buyer's knowledge.
* The unethical lender will ask you to sign blank documents, explaining that for the sake of expediency, they will be filled in later. He will be evasive when asked to review certain documents applicable to the loan.
* An unscrupulous lender may ask an appraiser for an inflated appraisal on a home, making it present as worth more than it actually is. He will promise the appraiser future business if the appraiser will do this.
How does a prospective buyer protect themselves from a predatory lender? Common sense dictates that you educate yourself in the process of home buying and lending in general, and to trust your instincts in dealing with lenders. If it doesn't seem quite right to you, it probably isn't. Trust no one in this process, and educate yourself in learning about the different types of mortgages, how the mortgage process works, and what your actual rights are. Remember, not every state regulates the lending institutions in the same way.
Know the market. Stay cognizant on trends and prices in your area. Many realtors use a process that takes into account the price of homes similar to what you wish to buy in any given area. If you are seeking to buy a home that is much higher in price than similar homes in your region, you may be in for a big surprise. A good rule of thumb is to never deal with a real estate agent that is not a member of the National Association of Realtors.
Always compare lenders. Just as you would shop around for the best deal on a new car, shop around for the best deal on a loan. The results may surprise you. By comparing lenders, you might come across a deal that is too good to be true. Beware of any lender that is promising loan rates that are considerably below other agencies in the area.
Following these simple guidelines will put you on the way to find what works the best for you, and gives you the best deal for your money. Always educate yourself on the workings of the market and lenders in general, and you will be well on your way to a good lending experience.
. Questions of a Do It Yourself nature should be submitted to our "