Unfortunately, predatory lenders do not run around in blue tights with a big “P” on the front of their chest. Predatory lenders come in two categories. The first category; these individuals will act like they are your newest best friend. They hone their skills to gain your trust and confidence. They seek out individuals with weak credit, the less financially educated or elderly individuals.
The second category of predatory lenders targets first time home buyers or individuals buying at their outer means. This group tends to push borrowers to untraditional mortgage programs. Although these programs are reasonable and effective for some borrowers, they are not acceptable for all borrowers.
- Every answer to a simple question goes unanswered or the answers don’t really make sense. A respectable lender will clearly explain the mortgage program in clear, understandable language.
- The lender fails to inform you or explain to you the closing costs. Nothing is free. Mortgages cost money, you need to learn who and how the fees are being paid. Being told, “there are no costs” or “there are no out of pockets” are key indicators to ask questions. A respected lender will explain the costs and the services for your mortgage. Federal Law, RESPA, requires all lenders to mail to you a “Good Faith Estimate” within 3 days from the application. You must have the Good Faith Estimate 3 days prior to the closing of the mortgage.
- Ask for a Good Faith Estimate, a copy of your mortgage commitment and a rate lock agreement before going to the closing!!!!!!!!!!!!!!!!!!
- A Predatory lender will pressure you to sign things, they will rush to close you based upon some urgent matter or you are getting a special bonus. A respected lender will never pressure you to close. They will notify you about the “Right of Recession”. You have up to 3 days after closing to “walk” away from a mortgage with no obligation.
- The closing agent does not represent the Borrower. A Predatory Lender will change the mortgage program at closing. You will not receive the loan you were initially disclosed. Walk away. A respectable lender will honor their commitments. If anything changes they will re-disclose the loan to you prior to the closing and explain the changes.
- Predatory Lenders will try to up-sell you. They want you to borrow more money than you need. They are not concerned if you will have trouble managing your payments. Quite often they are selling the loan. How you make a payment will not be their problem. A respectable lender will let you decide how much money you borrow.
- Predatory Lenders lead you to believe you have no other choices. Almost every loan gets sold to other lenders. This means other brokers/bankers/lenders will have a similar or better mortgage program. A respectable lender will let you know you have other options.
- Listen to your instincts. Nothing is Free. If it sounds too good to be true… it is.
Don’t let a predatory lender pressure you into a costly loan or a financially devastating mortgage. If you have questions about your proposed mortgage call us at 732.345.5000. View every mortgage as one aspect of your financial plan, it is part of a long-term goal.