Private mortgage insurance (PMI) can be an expensive requirement for your home loan, as it adds more to your monthly payment costs. This is a safeguard that your lender will take out to cover a portion of the amount you borrowed in case you default. Up Next: P.I.T.I.: Understanding The Parts Of Your Mortgage Payment […]
How to Recognize Predatory Lending
If you’re ready to purchase a home, it’s important to find a trustworthy Kansas City mortgage company. Unfair or misleading lending practices (called predatory lending) can lead to you losing your home or other unsavory consequences.
Warning Signs of Predatory Lending
If you know what to look for, there are quite a few signs throughout the loan process that should alert borrowers to predatory lending. Some signs may happen before you even start completing the loan application. These warning signs include, but are not limited to:
- The lender is pressuring you to apply for a loan you do not understand or know that you cannot afford.
- The lender is not willing to give a straight answer about the interest rate and the fees or costs associated with obtaining your loan.
- The lender urges you to lie about your income or provide other false information on your loan application to make it look like you are able to afford the monthly payments.
If a lender shows any of these signs, back off and find a new lender. Luckily, there are a couple things that lenders are required to do by law that safeguards borrowers against predatory lending:
Good Faith Estimate
A good faith estimate, or GFE, is a list of settlement charges that the lender is obligated to provide the borrower within three business days of receiving the loan application. This estimate lists the fees due at closing and is used as a way to compare costs from different Kansas City mortgage companies.
A good faith estimate is required by the Real Estate Settlement Procedures Act (RESPA). If you do not receive your GFE within 3 days, call your lender and insist that they provide you with this document. Once you are given your good faith estimate, make sure to check it for “junk fees” or excessive charges for anything listed. Address these items immediately with your lender.
Truth in Lending Act
The Truth in Lending Act (TILA) was created to protect consumers when working with lenders and creditors. Under this act, lenders must disclose the following items to borrowers before they are allowed to extend credit or financing to them:
- Annual percentage rate (APR)
- Term of the loan
- Total costs to the borrower
Choosing a Reliable Lender
The Better Business Bureau is a great resource for finding a reputable Kansas City mortgage company. The Bureau’s database is free for the general public to search online. It reports consumer complaints and company accreditations.
Another way to evaluate different lenders is to research each company online and read reviews from previous customers to learn about their experiences.