Purchasing a new home is everyone’s dream. Being able to provide a good home for the family brings such joy and fulfillment. However, when obtaining a loan for your new home, it is wise to take all possible precautions.

It is a fact that predatory lenders exists. Many have been victimized due to lack of knowledge and experience in buying a property. A house is a big and important investment that it can lead to frustration if it turns out that you’ve been taken advantage of by your mortgage lender.

Some warning signs to help you distinguish predatory lenders:

• Granting instant approval of application. Legitimate lending companies make it a point to always make a background check on an individual, particularly of one’s credit history before approving an application. If your mortgage lender offers you instant approval without verifying or inquiring about your ability to pay on a long term basis, there’s a great chance that you’re dealing with a predatory lender.
• You are obliged to pay for irrationally expensive fees. To know whether you’re getting a reasonable price for the loan, do your research. What is standard cost of loans in the market? How much do other lending companies require? Compare this with the cost that you’re being offered.
• The appraisal is way higher than the actual value of the house. Make sure that you’re getting the right value for the money you will pay. Again, do your research. Consult a reputable realtor and ask questions. Is the house really worth that much? Or is it deliberately over-priced so that you owe more than what you’re really getting?
• Alterations on pricing and terms of payment. Once the terms have been laid and closing has been done, a lender should not impose further changes on the loan’s fees and interest rates.
• You are not provided with proper documents. Mortgage lending entails accurate documentation of all terms and conditions which are agreed upon both by the lender and you, as the borrower. Be sure that what the document you’re signing stipulates all agreements clearly. Before signing, see to it that the document is dated correctly.

Most predatory mortgage lending is done with sub prime loans, or loans which are provisioned for people with less-than-perfect credit history. Unfortunately, predator lenders have exploited these consumers who don’t have much knowledge about bad credit mortgage loans. Predatory lenders are especially skilled in convincing unsuspecting home buyers to concur with unreasonably priced loans.

If you really don’t have much idea on how mortgage loans work, it would be wise to seek advice from a credible finance consultant. Government agencies and organizations such as the Better Business Bureau, the Federal Reserve Board, the Federal Trade Commission, or the National Association of Consumer Advocates provide complete information and guidance for public consumers regarding loans and properties. Educate yourself and learn about your rights, privileges and obligations as a home buyer and avoid being abused by predatory lenders.

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