In part one of this multi-part blog series, we went over some basic signs that you might be dealing with a fraudulent or predatory mortgage lender. While most lenders in the field are experienced and reputable, there are sadly some who attempt to scam or otherwise take advantage of borrowers entering the market, especially first-timers.
At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to offer a wide range of home loan services, including mortgages ideal for first-time homebuyers and many other services. We’ve also helped steer clients away from scammers in our industry, generally by providing them with some of the telltale signs that indicate you might not be dealing with an honest lender. Here are a few other such red flags to keep an eye out for as you’re evaluating which lender to work with for your mortgage needs.
There’s lots of paperwork involved in any mortgage loan situation, and this is one area where predatory lenders will try to fool you. One common tactic here is leaving several blank fields within a contract – the goal here is for the shady lender to go through and add details later, once you’ve already signed the contract, in an attempt to make these changes legally binding.
If you’re filling out a loan application by hand, be sure all blank spaces are filled with a proper value – or if there is no such applicable value, enter “N/A” in that space (do not use a single 0, which can be manipulated). For computerized filings, there should be an auto-filling format. If this is not possible, this could be an immediate red flag with your lender, as it should be a simple process.
Monthly vs APR
Another frequent tactic scammers will use is changing the way they represent the loan terms. Many will try to show you the monthly interest rate for a mortgage as if it’s the yearly rate, for instance, but you should be diligent here: Always ask for the APR, or annual percentage rate, which covers your full payment requirements including fees and other costs. Be sure you can afford the full yearly amount before entering into any agreement.
In some cases, a lender may tell you to intentionally misrepresent your information on a loan application. They may tell you to write down more income than you actually receive, for instance, or to report your income as full-time rather than part-time. Simply put, this behavior is illegal and represents fraud; any lender trying to talk you into it is committing the same crime, and you should never work with them.