Don't Get Fooled by Dubious Loan Deals

The mortgage industry is booming and anything goes to meet skyrocketing demands for home mortgage loans. It's a jungle out there. The smart home buyers get what they are looking for, while complacent consumers may get stuck with less than legitimate deals. The horror stories don't happen to everyone, but they do happen.

For example, many consumers don't understand the role of mortgage brokers. On a national basis, mortgage brokers handle about half of all mortgage transactions annually. The mortgage broker processes your application and submits it to a mortgage bank or savings and loan, which then underwrites and closes the loan. A mortgage broker's job is to find the best loan product for you and handle the loan origination process. Once that's over with, the actual loan provider takes over with servicing and closing the loan.

That's how it's supposed to work. But mortgage brokers do not always necessarily represent the consumer. In fact, they may receive fees from certain lenders for steering consumers toward those lenders' products. That's not necessarily a bad thing, so long as the broker gives you the straight facts, and you end up with a good deal. But mortgage brokers may promote loans on which they make the largest fees. As a result, you could end up not getting a good deal, or in the worst case, pay inflated interest rates or high closing costs you didn't count on paying when you signed the loan application.

Remember that the "buyer beware" rule applies no matter where you shop for and purchase a mortgage--from a savings and loan, mortgage company, bank, credit union or broker. The second rule is always shop around. Don't rely on promises or a glib sales pitch. If something sounds too good to be true, it probably is.

Fortunately, all consumers have certain rights under federal law. Before you enter into any loan agreement, remember you have the right to:

• Shop for the best loan for you and compare the charges of different mortgage brokers and lenders.

• Be informed about the total cost of your loan including the interest rate, points and other fees.

• Ask for a Good Faith Estimate of all loan and settlement charges before you agree to the loan and pay any fees.

• Know what fees are not refundable if you decide to cancel the loan agreement.

• Ask your mortgage broker to explain exactly what the mortgage broker will do for you.

• Know how much the mortgage broker is getting paid by you and the lender for your loan.

• Ask questions about charges and loan terms that you do not understand.

• Receive a credit decision that is not based on your race, color, religion, national origin, sex, marital status, age, or whether any income is from public assistance.

• Know the reason if your loan was turned down.

• Ask for the HUD settlement costs booklet "Buying Your Home."