Predatory Lending: How To Protect YourselfBy Arnold Mann, Mortgage Funding USA
In part one, we discussed the meaning of Predatory Lending and how to recognize it when it occurs. Predatory Lending is not easy to define as it takes all shapes and forms and attacks the rich, poor, educated, uneducated, young, and elderly, and occurs in all types of neighborhoods. Predatory Lending is an economic cancer that can rob a homeowner of the equity in their home or take a great interest rate and convert it into a rate that you, the homeowner, cannot afford. Whatever form Predatory Lending takes, it is preventable and in many cases it is curable. Your best defense against Predatory Lending is to be an informed borrower. You begin the process by determining what kind of mortgage you need and what kind of mortgage you want.
Before you begin the refinance or purchase process, you need to think about and answer some questions that are listed below. If you do not answer them honestly, then you might be swayed and lead down a mortgage process path that is not the best financial solution for you, and thus not the right mortgage. This could cost you thousands of dollars over the term of the mortgage.
Answer the following questions:
How do you answer the above questions? You need to gather all of the following paperwork:
LET'S GET ORGANIZED
Lenders come in many different shapes and forms, from your local bank, Savings & Loan, Credit Unions, National Mortgage Lenders (i.e., Countrywide, Washington Mutual), Internet Companies (LendingTree, E-Loan), to Mortgage Bankers and Mortgage Brokers. As a consumer you have a wide selection. Each of the above can give you a great mortgage loan - if you have done your job and have determined in advance what you need and what type of mortgage loan you qualify for!
You've made your decision on the Lender you will use, checked the average rates, and now it's time for your initial meeting. The loan officer will begin by asking you many questions or start taking an application. You have at your fingertips all of the answers-this will be a surprise and thus will put the loan officer on the defensive since he is now dealing with an informed consumer. Inform him of the type of loan you are looking for (example: I want a 15 year fixed rate and I want $10,000 cash out after all expenses are included in the loan.) You have taken charge; you have directed him to one product and thus made his life easy. He should come back with a rate quote or payment based upon the information you've given. You should not have been charged one penny at this point in time. Once he quotes the rate, you need to ask him what he charges and a breakdown of the fees associated with the loan. You do not want this verbally but on a GOOD FAITH ESTIMATE (GFE) and a TRUTH IN LENDING STATEMENT (TIL). He is required by law to send you these documents within 3 business days of taking an application from you; if he does not or is reluctant to give you the GFE and TIL, move on to another Lender. The only way you can see or compare if you are receiving a great mortgage loan is by having the GFE and TIL to compare to another. These documents level the playing field. It gives you, the consumer, the ability to analyze which Lender's deal is best for you, or at the very least, what the costs are that are associated with the loan.
Once these documents are received take time to review them in detail. Ask questions about each item that is listed on the Good Faith Estimate, after all, this is your money. At this point you have enough information to compare one quote against another. Should you obtain another quote on your loan? Absolutely! This is another way to make sure you are not being taken advantage of by a Predatory Lender.
Part three of Predatory Lending will discuss what you can do if you have fallen prey to Predatory Lending. Until then, stay informed, ask questions, know your own situation, and take your time. This is one of the most important financial decisions of your life.
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