Article Surfing Archive

Although the majority of mortgage lenders have very high standards, some practices bear watching. Consumers that fail to thoroughly inspect the contracts they're signing may find that they've incurred unwanted and unnecessary expense.

The most common ripoff is an 'interest lock'. After you've shopped around for a lender and decided which one to use, they may offer to lock in the interest so that you will pay that specific rate even if the interest rates rise before you sign the mortgage. Get it in writing! A verbal promise of a 'lock in' is worthless unless it's committed to paper. Even then your closing may be delayed until the time limit on your lock runs out and you end up paying a higher rate. This is called 'running' the lock. Unless you've obtained a signed promise with the interest rate you've locked in and a firm closing date, you may be stuck with a much high rate than you had anticipated.

Be sure to check out the lender you're dealing with, call the Better Business Bureau and state regulators to ascertain the reputation of the firm you're dealing with. Start with lenders that your friends and acquaintances have been satisfied with, get your paperwork completed without delay and if you do suspect that your loan is delayed start complaining.

You should always keep an eye on the interest rates. If you're quoted and interest rate of 6%, for instance, and by the time you're ready to lock in the rate dropped to 5.75%, the broker may not tell you of the drop and lock you in at the higher rate.

There's nothing illegal about this practice as long as it's disclosed in your contract but there is usually no notice until you're ready to close. You have to wade through a lot of legalese to find this information so the best way to protect yourself and your wallet is to pay attention to how the interest rates are changing.

You should make sure that your mortgage doesn't include a prepayment penalty, even if you have no intention of paying off your loan early. You may want to refinance to take advantage of a better interest rate or for some home repairs or remodeling. Since refinancing involves paying off your lender with money borrowed from another lender, you have effectively paid off your mortgage early.

If you have a prepayment penalty in your mortgage contract, you will be charge approximately six months of interest on eighty percent of the remaining amount of your loan. If you're not sure after reading the contract whether a prepayment penalty is included, ask to shown where it states there is no prepayment penalty. It's always advantageous to have a real estate attorney review your contract. The money you spend on an attorney's fee may save you thousands of dollars while giving you assurance that you have the very best contract possible.

A very popular and surprisingly lucrative rip-off involves paying a bank or a company to set up your mortgage payments on a bi-weekly basis. The concept behind bi-weekly payments is sound and legal, allowing you to make one extra payment per year and reducing the length of your mortgage.

You'll save thousands in interest this way but again, be sure there isn't a prepayment penalty in your contract. You definitely do not have to pay to set up bi-weekly payments! Your mortgage company will be more than happy to set up such an arrangement and won't charge you a cent to do so.

The very best way to protect yourself from common mortgage rip-offs is to pay attention, read your contract and have an attorney check it out before you close on your property. You'll be glad you put in the extra effort, and so will your wallet!