6 Ways to Spot a Predatory Lender
Refinance rates are low and you've done research about getting a mortgage. Now you just have to find the right mortgage lender to get the ball rolling. But before you fill out that mortgage refinance application, make sure you're dealing with a reputable firm. Here are six signs of a predatory mortgage lender.
- Too many fees are a huge red flag. Familiarize yourself with the typical fees involved with refinancing a mortgage in your area. While you should expect to pay fees for a mortgage broker's services and closing costs such as title insurance or appraisals, use caution about paying a lot of points or origination fees that seem too high.
- Does the mortgage lender seem to be steering you into a higher cost loan or trying to get you to borrow more than you can really afford? This could be a sign that the company is trying to boost its profit by pushing you into a certain loan product.
- Avoid mortgage lenders who ask you to lie on a loan application, sign an incomplete or blank form, or participate in any type of fraud.
- Avoid refinancing into a high-interest loan with prepayment penalties. Doing so could cost you money down the line if you wanted to refinance again or pay off the loan early.
- Be wary of aggressive tactics to get you to apply for a mortgage refinance. This could involve salespeople who go door-to-door or continue to call you after being told to stop. Be skeptical of doing business with mortgage companies that contact you unsolicited and make promises that sound unbelievably good.
- Pressure to sign up for insurance or other products in addition to a mortgage is a red flag. Don't fall for pitches that say you are required to purchase a credit life insurance policy.
Shop to find the best mortgage rates and the best mortgage lenders. Check with your state Attorney General's office and the Better Business Bureau to make sure you choose a reputable mortgage company.
