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with the rapid rise in real estate values over recent years, there's also been
a dramatic increase in the number of mortgage scams perpetrated by unscrupulous
lenders. Here
are 5 common scams every home buyer and owner needs to watch out for: 1.
Be careful of the interest rate they quote when you call When
you're looking for a lender, don't just call them up and ask, "What's your
rate?" If you do that you'll be given rates that are really never available.
You have to indicate what kind of loan you need as specifically as possible. Unless
you detail all the conditions you need, lenders can pretty much say whatever they
want, and then provide different figures when you later apply and blame you for
the lack of specificity. This "bait and switch" scam is rampant because
after becoming worn down by the whole process, most borrowers don't want to want
to start all over again with a new lender, so they resign themselves to getting
a loan much worse than first promised by the lender. 2.
Ask about fees and compare Borrowers
often forget to ask about fees, and don't compare lenders based on those costs
such as "underwriting fees", "document preparation fees" "warehousing
fees" and other miscellaneous charges to the loan. Lenders are required to
give you a "good-faith estimation" of the cost within 3 days of loan
application, but they don't usually tell you the cost before you apply. But this
is a very consideration when comparing lenders. If you don't do your homework,
you might end up paying more than you need to. Shady lenders are glad to keep
you in the dark, and put more of your money into their pocket. 3.
Beware of Advertising Tricks THE
1% LOAN
A 1% loan doesn't mean the lender will charge only 1% interest
on the loan. This type of loan has initial teaser rate of 1% and it's negatively
amortized, that means your principal keeps increasing as you make the minimum
payments. For example, if you borrow $500,000 at 7% and you make the minimum payment
for the first year, your principal will increase by approximately $15,600 a year.
Many lenders are happy not to tell you about this. NO
COST LOAN
When you hear about lenders offering "no cost refinancing"
or "no cost loans", turn and run the other way. It really means "no
out-of-pocket costs at closing" but you end up paying much higher rates on
these mortgages and lenders use the extra money to pay the costs themselves. The
result is that you end up paying out much more out of pocket money than if you
had paid loan costs up front. Once again, less than reputable lenders love to
make these kinds of loans. APR
The
annual percentage rate, or APR, found in advertisements can be misleading as well.
Mortgage lenders don't always include all the fees they charge in the calculation
that determines APR, so you end up using an inaccurate figure to shop around,
rather than an itemized breakdown of rates, points and fees - you end up comparing
apples to oranges. 4.
Know your credit score After
you apply and have your credit scores pulled by the lender, ask for a copy of
your credit report with the score. Lenders have no obligation to give it to you,
but isn't it normal that you get a copy of it? And if the lender will gladly give
it to you, you know you're getting good customer service. Your credit scores often
dictate whether you get loans and what interest rate you get on your loan. 5.
Prepayment penalties Lenders
often don't tell you - or "accidentally forget" to tell you - about
the prepayment penalty. If you think there's a possibility you'll pay off your
loan entirely (or more than 20% of the balance) within a couple of years, a prepayment
penalty is a critical factor to consider when you choose a loan. You must ask
the lender about this before you commit or sign anything. When
my clients are considering refinancing or obtaining a new loan, I always provide
accurate, realistic loan estimates that always come with a detailed cost breakdown.
Feel free to contact me at no obligation, but no matter who you do call, be sure
to avoid the mortgage scams. 
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