Buyers need to beware of some of the practices of some of the lending companies out in the marketplace. With interest rates so low and so many first time home buyers looking to gain their dream of getting their first home, they may sometimes do anything a lender tells them in order to obtain a loan.
However, this is another reason for a buyer to listen to their Realtor and make sure that they get several opinions and go to a reputable lender. They could possibly even give you names of people who have used them in the past and have success stories to tell.
With the economy being what it is and so many people developing credit issues in record numbers, don't allow a lender to lead you down a path of destruction by telling you they can do something for you that they can't. If you have great credit and can qualify for a really low interest rate and great terms, that is so great for you and you should be very proud of yourself. However, if you have some issues with your credit and just want to obtain a loan so bad that you will take whatever the lender offers, buyer beware!
There are many companies out there that are involved in what is called "predatory lending." This type of lending involves very high interest rates, ridiculous pre-payment penalties and many other unnecessary fees. Please do yourself a favor if you fear that a lending institution may be using this type of mortgage lending practices and contact the Department of Financial Institutions, your local Housing and Urban Development branch or your local government office to file a complaint and possibly start a necessary investigation.
Illegal and damaging things to look for that a lending institution may ask you to do:
1. Never re-write a contract using a different sales price or different terms than you originally agreed to.
2. Never sign a closing statement (HUD-1) that does not accurately reflect the actual transaction that took place at that closing.
3. Do not file or allow anyone else to file a deed that does not accurately state the actual purchaseprice of a piece of real property because that is a felony.
4. Do not sign up for a loan that has a very high prepayment penalty (what you pay to sell the house should you need to before that term is up) because you may be in for a shock when you sell and have to come up with money that you don't have to pay off that prepayment penalty.
Remember also to make sure that YOU CAN AFFORD the property you are purchasing. In the past,a lot of banks and mortgage companies would lend up to 100% or more on a property and then when the value of the property dropped or their rates went up, they could no longer afford it. Unfortunately, 80% of the properties that involve some sort of predatory lending result in foreclosure. How sad would that be to achieve the dream of home ownership only to have it ripped out from under you because the company you chose to do business with in obtaining your financing was unscrupulous? It would be disastrous and unfortunately, you probably know someone who has gone through that very thing. Don't be a statistic-listen to the experts and always get a second opinion.
Above all else, follow our heart and do what it tells you. You know better than anyone what you can afford and when it comes to the things that you don't know, rely on someone who you trust and has the knowledge you need to get the job done right the first time. If you do, you will live without the worry that so many people have had to endure in record numbers lately.
I wish you all the success in the world in your search for the right Realtor, Mortgage Banker, Attorney, Appraiser, Home inspector or anyone else you may need in your quest for your DREAM of HOME OWNERSHIP!
Jane
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