Spot the Predatory Lender before He Traps You!
By Sadiya Anjum
Predatory practices in real estate can be employed by anyone who is a part of the loan market, i.e. lenders, mortgage brokers, real estate brokers, attorneys or even home improvement contractors. Most people who are victims of these practices are those who are looking to refinance their homes, people with low credit but decent equity on their homes, minority homeowners, elderly etc. It is just about anyone who can be fooled and with aggressive predators it may include almost all of us who are not in the loan business.
Being taken advantage of is not just insulting but may strip your home of equity, leave you broke or homeless. Awareness about what encompasses predatory practices is essential. However when someone smooth talks you with low interest rates and negligible fees, details you read about predatory practices may evaporate. So here are some simple ways to find out if you are being conned by a possible predator:
The property you are planning to buy costs much more than those in the neighborhood even though it is not very different from the rest.
Someone tells you that they are your only beacon of hope to obtain a loan. Remember, there are plenty of fish out there; you just need to look properly for them.
You are asked to sign any contract or document that is blank even if he is just going to fill it out as soon as he gets into the office later today. Or if you are asked to sign a document containing incorrect information.
On closing day, the terms mentioned or loan agreed upon is not quite the same on paper. Or even if verbally the terms are suddenly changed at the last minute.
If someone convinces you that refinancing is the only solution to solve your money or credit problems.
Telling you that home improvements will definitely get you a better loan. Or when you are looking to make home improvements, insisting that you will obtain the only best loan available from a particular lender.
Pushes you to lie on your loan application form about your financial condition, your expenses, etc. in order to obtain a loan easily. Also encourages you to borrow an amount which is much more than you need.
Either encourages you to borrow more than you need or more than your property is actually worth. Or if you are pushed to accept payment terms that you cannot actually meet.
If someone denies you copies of documents that you have signed. You have an equal right of access to documents concerning you with your signature on it.
If applications are accepted over the phone. Most predatory practices involve aggressive sales tactics including calling you all the time, offering products at your doorstep etc. Realistically lenders will stay put expecting you to approach them instead of badgering you with loan offers you may not really need.
Next-day approval is offered if you pay a certain amount right away (today) or if a lender asks you fees on the first day to cover expenses.
A lender promises you rock bottom low-interest loans or if the interest is way above sanity.
If your loan includes unnecessary items and lender demands that you pay for them, like disability insurance or mortgage life insurance. Loan also involves an agreement to refinance additional mortgages.
You need to keep your eyes and ears open whenever you plan to apply for a loan. If you get trapped once, it may be very difficult to get out of it as the lender is counting on you to shell out more money than necessary. People who are aggressive in their marketing style or seem pushy should best be avoided. Watch out for sales persons who knock on your door and promise sweet deals for nothing in return. Always remember if something sounds too good to be true, then it probably is not true. Use your common sense and if instinct gives you a red signal, then take a hard look at what is happening or get some professional advice.
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