Tips for Avoiding Predatory Mortgage Lenders

Tips for Avoiding Predatory Mortgage Lenders

Have you ever been targeted by a predatory lender? If you are in a precarious financial situation, you may be on their target list. Use the following tips to recognize predatory lenders so you can avoid them.

Many desperate home buyers use the services of a predatory lender to help them own a home. Of course, you won’t see a sign that says “Predatory Lender” on a mortgage lender’s marquee. That is why it is so important to know the signs of a predatory lender so you do not get taken in by one. Here are some tips to help you avoid these types of lenders so your home buying experience isn’t a horrible one.

Their Target
Predatory lenders aren’t going to reach out to people who have good credit and several options when buying a home. Their targets are typically home buyers who have bad credit or buyers who are higher risks due to their credit history. These lenders also reach out to older home buyers, buyers with low income, women, minorities and people who are no informed about mortgages. If you fall into any of these groups, be extra careful about the lender that you choose when you start looking for a mortgage.

Too-Good-to-Be-True Terms
One way to be sure that you are dealing with a predatory lender is that they are offering you terms that really seem too good to be true. Are they offering extremely low payments that do not seem to calculate correctly? Is the lender trying to encourage you to take out a second mortgage to pay off other debts like medical bills or credit card bills? If so, there is a good chance you are dealing with a predatory lender.

Unnecessary Fees
One telltale sign of a predatory lender is that they offer very high interest rates or they will charge your unnecessary fees, such as broker fees, prepaid life insurance or repayment terms that you simply cannot afford.

Listen to Their Phrases
If you see a lender advertise on TV or in a print publication and they use phrases like “bargain mortgages,” “deal is good for only a short time,” or some other phrase that sounds shady, stay away from them. Most reputable lenders do not use clichéd phrases or offer deals for a “short time.”

When shopping for a mortgage lender, you do not always want to go with the least expensive company or with the one company that will offer you a mortgage when dozens of others will not. The best thing to do is to take a few months to improve your credit score and save up a down payment so you won’t be targeted by predatory lenders. And if you have your doubts about a particular lender, you can always find another one that you are comfortable with.

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