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SaveMORE Loan » Mortgage

August 31, 2007

What you should know about “bad credit” mortgage lenders

by @ 1:49 pm. Filed under Uncategorized, Mortgage

 

If you have a checkered credit history, you have plenty of company—about 1/3 of American consumers. Some lenders specialize in lending to people with less-than-perfect credit. It’s a simple idea—charge higher interest in exchange for the perceived risk. Some subprime lenders, including industry leader Ameriquest, have been accused of shady practices—extravagant loan prices, excessively high interest, etc.

 

In the current slowed real estate market, a number of these companies have gone out of business, including Ameriquest. This is bad news for some low income and minority borrowers, for whom borrowing at “subprime” rates has made the dream of homeownership attainable.

 

The main risks of saddling a consumer who has already had problems paying their bills are default and foreclosure. Creative financing that accompanies subprime loans often involves ARM’s (adjustable rate mortgages), which are very tricky in an economy with rising interest rates.

 

You do need to be more cautious when using this avenue, and thoroughly investigate your provider. If your credit score is between 620 and 640, beware. You are a prime target for unscrupulous subprime marketers. Shop around, and apply for a conventional home loan first.

 

Link to first-ever large scale study of subprime lenders:

http://www.consumeraffairs.com/news04/2006/12/crl_foreclosures.html

Abbrev Avoiding Predatory Mortgage Lenders

by @ 1:46 pm. Filed under Mortgage

Always shop around to get the feel of different broker approaches and personalities. More importantly, compare rates and terms so that disproportionately high ones will stand out.

 

Don’t wait until you get to the closing table to find out the lender isn’t offering what (s)he promised. If you are refinancing your home, you have a 3-day cooling off period to back out of the deal.

 

Insist that your FICO score be explained in detail. There are brokers called sub-prime lenders who offer home loans to ‘bad credit risks’ at higher rates. They are not necessarily unscrupulous.

 

Don’t pick your lender through any of the following methods:

A random flyer displayed outdoors or stuck to your windshield

Junk mail from an unknown company

Telemarketer

 

If you’ve picked your lender from a legitimate source and you are still uncomfortable, go with your gut. Here are some shyster tactics:

The broker spews a monologue, leaving little room for your input

You’re being finessed into agreeing something you don’t understand

The rates are very high

The broker pressures you in any way, either to close the deal or accept higher payments than you can afford

They use the phrase “bad credit, no problem”

They OK “fibbing” on the application

They ask you to sign a blank contract

The loan is presented as a cure-all

They use intimidation tactics, saying that “no one else will lend to you”

 

Link to credit and your mortgage loan

http://www.housebuyingtips.com/organize.htm

 

Always report shady lenders to the Attorney General or the FTC, even if you’re embarrassed. Do the next guy a good turn.

January 25, 2007

Top ten questions to ask your mortgage broker

by @ 1:40 am. Filed under Mortgage

 

ASK YOUR MORTGAGE BROKER THESE VITAL QUESTIONS These are screening questions to see if you are comfortable enough with a broker to give him or her your business.

1. What kind of loan fits my situation?

You want the broker to ask you lots of questions before answering this one. You should understand these types of loans:
Fixed-rate
Adjustable-rate
Interest-only
Negative-amortization

2. How do adjustable rate mortgages work?

You will want the broker to explain:
How often the rate adjusts
How high your rate can go in a year
How high your rate could go over the life of the loan

Which index is being used to calculate the rate

3. What points and fees will you charge me?

A point is like a premium you are charged for getting the loan, and is tax deductible. One point = 1% of total loan. As your points go up, your interest rate goes down.

Try to find a lender who won’t charge origination fees, or who will reduce them to get your loan.

4. What will this loan cost me – grand total?

Lenders are legally required to supply you with a good faith estimate (GFE) that encompasses the following:
Appraisal
Credit report
Taxes
Title policy
Pest inspection
Escrow
Appraisal
Recording fees

5. Will you guarantee your GFE?
By law, a lender must give you the GFE within 3 days of your loan application. It is worthless unless it’s guaranteed, so you’re better off only patronizing lenders who will.

6. Do you lock rates for your clients?
If interest rates show signs of increasing, lock your loan! Some lenders don’t charge extra for a rate lock. Find out exactly which of the loan costs are covered by the lock, how long the rate can be locked and ask for a written agreement.

7. Is there a prepayment penalty?
First, check to see if your state has disallowed this penalty. Lenders charge prepayment penalties on the perceived loss of interest (which to them is income) if you repay your loan early.

If the penalty is still legal in your state, ask the amount, the terms and if it could be waived if you refinance through the same lender.

8. Do you underwrite your own loans?
Your loan will probably go through faster if the answer is yes. This factor is especially relevant if you are applying for an FHA or VA loan. If you are, you should ask specifically if the lender can approve either of these two without sending them to the relevant agencies.

9. How long will my loan take to fund?
The average amount of time is 3 to 7 weeks. In order to project a closing date, you need to know what might happen to hold up funding, and how long after your loan is approved it will fund.

10. Do you receive a bonus or commission on this loan (YSP)?
Try to find out if your loan officer’s YSP will make your loan more expensive.

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