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
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
- 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."