September 2nd, 2014 3:17 AM by Jackie A. Graves, President
The old joke: the greatest trick the devil ever pulled was
convincing the world he didn’t exist.
The sad truth: the greatest trick a lender could ever pull is
pretending your best interests are at heart while laughing all the way to the
bank after giving you a bad loan.
When you go to shop for a loan,
look for these bad loan warning signs—and be prepared to run—not walk—away from
the table, from any lender who does the following dubious actions.
1. Says It’s Okay to Fudge Some Numbers
If your lender is trying to get you to lie about your income in
order to get a bigger loan, stop dealing with that lender immediately.
There is no such thing as a little white lie when borrowing
money: it’s mortgage
fraud, and it could get you slapped with steep penalties or even
2. Pressures You into a Bigger Loan
Beware of any lender who pressures you into borrowing more money
than you need.
You will likely pay more in interest on the extra cash than
you’d earn in interest by stashing it away in a savings account.
Stick to what you need, no more.
3. Doesn’t Consider Your Monthly Income
Figure out whether you have enough
coming in to cover all
your monthly bills, a new mortgage and a savings account for emergencies.
Know that number and stick to it—if a lender starts pressuring
you into a bad loan with monthly payments you know you can’t afford, get out.
If your outflow
is more than your inflow, you will find yourself in trouble rather
4. Doesn’t Disclose Documents
Beware of any lender who fails to provide you with the required
loan disclosures or tells you don’t need to read them.
By law, lenders have to tell you the annual
percentage rate (APR) plus provide a
good faith estimate (GFE)—an itemized list of estimated closing
costs—within three days after you apply.
The APR includes not just the interest rate, but also points,
broker fees and certain other credit charges. The GFE covers these charges as
well as everything else you’ll be asked to pay at settlement.
You should use these documents to loan shop.
5. Promises One Thing, Delivers Another
If you are presented one set of terms when you apply for the
loan and a different set at closing, you should demand an explanation.
It could be a bait-and-switch scam,
where the lender is trying to pressure you into signing these new documents
with worse rates or unfavorable terms.
Be prepared to walk away and take your business elsewhere.
6. Says It’s Okay to Leave or Sign Blank Forms
It is never okay to sign a blank form, period. If you leave
blanks, a scamming lender could fill in extra terms and conditions that could
alter your loan—and not for the better.
Worst-case scenarios could have lenders who write in clauses
surrendering the title of your home.
Don’t let anyone fill in the blanks later. If there is a
blank, cross it out and initial your mark.
7. Doesn’t Provide Copies
Lenders may not give you the actual filled-in papers in advance,
but they should give you blank documents so you can take them home
to review or show them to a trusted advisor.
If they won’t, maybe they have something to hide.
If the lender won’t give you copies of what you’ve signed at
closing, cancel the deal right then and there.
These papers contain important information about your rights and
obligations, and you need them.
Always Ask Questions or You Could Get a Bad Loan
When there’s something you don’t understand while shopping for a
mortgage, consult with someone you trust for an explanation.
That could be an attorney, financial advisor or your local
credit counseling agency.
By: Craig Donofrio | Updated from an earlier version
by Lew Sichelman.
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