The Top 5 Mortgage Red Flags!
June 29th, 2009Unless you are living a mortgage-free life… you have probably considering purchasing a home or refinancing a home over the past several months. Interest rates have been great, but there are a few things you want to consider when searching for the right loan for you.
Keep these Red Flags in mind when mortgage shopping…
1.) Application Fees: Most reputable lenders today have stopped charging application fee’s before issuing an approval - but there are still a few mortgage brokers that will charge upwards of $500 to begin processing your loan.
Take it as a red flag if your broker tries to make you pay this. It is unnecessary, and usually non-refundable. So, it could be possible that a loan approval is not possible and broker is looking to make a quick $500 as a backup.
2.) Pre-Approvals “willy nilly”: Keep in mind that the current mortgage market and guidelines are changing every day. If your mortgage broker is issuing you a pre-approval letter without reviewing your information, or at least asking a LOT of questions, take it as a red flag.
There are some brokers that try to get you “in the door” and then work on your loan from there. This is a backwards way of doing things and will cost you a lot of time in your mortgage process.
Consider it a “green flag” if your broker or loan officer is asking for your W2’s, Paystubs, and Asset Information. This information will give the loan officer a better picture of your current financial situation.
3.) DO NOT COMMIT LOAN FRAUD!: This one may seem like a no-brainer and you would probably never do something like this. But, keep in mind… loan fraud is stating that you will live in a house that you plan to rent out. Mortgage loan fraud can also be committed by fudging your income numbers, etc.
Mortgage oversight is much stricter than it used to be, and most brokers don’t have the guts to do things like this… but there are a few that are rolling the dice.
Consider it a HUGE RED FLAG if something like this is suggested, then… find a new lender.
4.) Pushy Loan Officer: Be leery of any broker that is trying to get you to sign right now. If the broker seems overly aggressive don’t let them push you into something that you are not interested in.
It is true that interest rates are bouncing around a lot these days, and in a few cases in may be in your best interest to lock quickly. If this is the case, do your homework a little quicker by checking around with other lenders. But, if your loan officer is making you uncomfortable or not working at your pace then beware.
5.) Teaser Rates: The biggest thing to watch for when searching for a mortgage is something called a Teaser Rate. Some brokers will try to lure you into their mortgage pipeline by promising you a rate that doesn’t exist.
Be sure to ask for a Good Faith Estimate and compare to some other lenders that are in the market. If you compare a couple of GFE’s and one of them is way out of whack from the others… beware.
Sometimes a low rate will be offset by higher fee’s… so when you are comparing rates, be sure to keep in mind that the key indicator of the cost of your loan… or the true cost of the money you are borrowing is shown by the Annual Percentage Rate or APR.
You can get the APR from your Truth In Lending Statement and should be sent along with your GFE at the time of your initial quote.
When shopping for a mortgage, it is always a great idea to shop around… one convenient way to do this is by checking out LendingTree. This is a fantastic way of getting several quotes in a short period of time.
Best of luck!
Nathan
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