Mortgage lending, like most other businesses, have the good, the bad, and the downright scary. Good lenders are professional, work hard to put your loan together quickly, and make the experience enjoyable. The bad lenders cost you time, money, and frustration because they don’t have the resources or competence to do a good job. Scary lenders are the worst. They’re out to make as much money as possible by whatever means possible . . . and fraud isn’t a problem with them.
Borrowers who are forced to go with subprime loans are often targeted because they are more vulnerable, have limited options, and are least likely to shop around.
In a nutshell, predatory lending is taking advantage of borrowers by adding nonstandard fees, overcharging on loan fees, and steering applicants to more expensive loans when they could qualify for cheaper ones.
Manuel and Geri found out the hard way about bad lenders when a relative pressured them to go with a friend in the mortgage business. They had found a cute bungalow close to their children’s school and made an FHA offer with a four-week closing date.
The loan officer took their application and explained that he would need a $250 credit and application fee to get started and would get back to them in a few days.
Two weeks later, when Manuel and Geri hadn’t heard from their lender, they called him several times, getting a recorded message and the usual beep. He never returned their calls. Finally, into the third week Manuel got their lender’s home number from their relative and called him. It was a big shock when he told them his company was not an FHA approved lender so he couldn’t do a loan for them. And they were not entitled to a $250 refund because it had been spent for a credit report and other fees.
Manuel and Geri ended up losing their home purchase because the sellers had a backup offer and refused to extend the closing date. Fortunately, the buyers were able to get their earnest money deposit back since the offer was subject to financing. (When you make an offer to the sellers or their agent to show good faith, you give an earnest money deposit so that the sellers take the home off the market for a specified period of time.)
Lessons learned:
One, never pay more than the credit report fee up front, normally $40–$75. When the credit, income, and ratios are done and everything looks good, then pay the appraisal and other required fees.
Two, not all lenders are equal. The good ones save you money, the bad ones cost you money. If a lender is a relative or friend, let them compete for your business with other companies. The old saying about doing business with friends and relatives applies even more to mortgage lending, since it’s such an emotionally charged situation.
Borrowers who are forced to go with subprime loans are often targeted because they are more vulnerable, have limited options, and are least likely to shop around.
In a nutshell, predatory lending is taking advantage of borrowers by adding nonstandard fees, overcharging on loan fees, and steering applicants to more expensive loans when they could qualify for cheaper ones.
Manuel and Geri found out the hard way about bad lenders when a relative pressured them to go with a friend in the mortgage business. They had found a cute bungalow close to their children’s school and made an FHA offer with a four-week closing date.
The loan officer took their application and explained that he would need a $250 credit and application fee to get started and would get back to them in a few days.
Two weeks later, when Manuel and Geri hadn’t heard from their lender, they called him several times, getting a recorded message and the usual beep. He never returned their calls. Finally, into the third week Manuel got their lender’s home number from their relative and called him. It was a big shock when he told them his company was not an FHA approved lender so he couldn’t do a loan for them. And they were not entitled to a $250 refund because it had been spent for a credit report and other fees.
Manuel and Geri ended up losing their home purchase because the sellers had a backup offer and refused to extend the closing date. Fortunately, the buyers were able to get their earnest money deposit back since the offer was subject to financing. (When you make an offer to the sellers or their agent to show good faith, you give an earnest money deposit so that the sellers take the home off the market for a specified period of time.)
Lessons learned:
One, never pay more than the credit report fee up front, normally $40–$75. When the credit, income, and ratios are done and everything looks good, then pay the appraisal and other required fees.
Two, not all lenders are equal. The good ones save you money, the bad ones cost you money. If a lender is a relative or friend, let them compete for your business with other companies. The old saying about doing business with friends and relatives applies even more to mortgage lending, since it’s such an emotionally charged situation.
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