Recognizing Predatory Mortgage Lenders
A predator is defined as one that preys on others, which is why some lenders have fittingly earned the title as predatory mortgage lenders. Excessively high interest rates, questionable and/or hidden fees and high pressure tactics used to direct borrowers to a larger loan than they may be able to afford are trademark characteristics of a predatory mortgage lender.
Prey Verses Predator
When it comes to obtaining a mortgage, the rules of the jungle often apply. If you aren't careful, you may find yourself in the grasp of a questionable foe. If you are someone who has had past credit problems or simply find yourself struggling to obtain a mortgage, it may seem like a good idea to sign on with any lender who can close the deal.
But wait, jungle etiquette suggests that you should be knowledgeable of your surroundings and always look before you leap. Before making a quick decision on a loan that nobody else would approve, ask yourself whether or not the deal is a good one for you.
If you suspect that you have been subjected to a predatory mortgage lender, look at how they measure up to other lenders. Were you charged fees up front and, if so, how much were they and what were they for? Do the lender's interest rates compare to current market rates or do they exceed them? When reading the fine print, do you notice fees that were never mentioned before but have now suddenly appeared in the paperwork? An honest lender has nothing to hide and will not surprise you with unexpected costs.
Who's At Risk
To put it simply, anyone is at risk for dealing with a predatory mortgage lender. This likelihood increases, however, if the homebuyer lacks the proper knowledge in how to identify an unscrupulous lender who preys on the misfortune of others.
Individuals who are especially vulnerable include those that have been turned down by other lenders and have little or no hope of obtaining a conventional loan. This may include individuals with severe past credit problems, accounts in collections, first-time homebuyers with little or no credit history and the elderly who have difficulty understanding the loan process or reading the fine print.
When it comes to obtaining a home loan, the process can be both exciting and confusing. There is a lot of paperwork to be signed, details to be worked out and numbers to be crunched. Your REALTOR® can help to steer you toward a lender that will help you to get the best value for your dollar.