There are many lending institutions out there that will provide you with a loan that meets your needs, your budget, and your timetable. However, there are also some unscrupulous lenders out there who will try to take advantage of you. These lenders will target the elderly, those with credit problems, and those who don’t make a lot of money by tempting them with the prospect of home ownership. However, as with anything that’s sounds too good, these loans always come with a downside that can lead the borrower into bankruptcy.
So what are some red flags that should tell you the lender you’re working with isn’t on the up and up? Here are a few:
- The lender tells you it’s okay to falsify information on your loan application. This is actually a crime and can result in jail time. Even if you don’t go to jail, you could be required to immediately pay back the entire loan. If a lender says it’s fine to fudge even the smallest detail, walk away.
- Don’t work with a lender who tries to convince you that you can make a higher monthly payment than you believe you can. If you’ve looked at your budget and know what you can afford, stick to that. Sure, that amazing property that has everything you could ever want looks nice, and yes, the lender seems to be offering you a great rate, but don’t fall for it. You’ll end up living off of credit cards or defaulting on the loan.
- Watch for lenders that offer certain terms when you’re applying for the loan, but then unexpectedly present different terms at the closing. Make certain to always read over everything regarding the loan (another sign of a bad lender: he or she tells you that you don’t have to read over it). If anything looks like it has changed, ask for an explanation. Even if you get one, be prepared to seek out another lender. None of the terms should change without a very, very good reason.
- Never, ever sign a form that is not completely filled out or is blank. No lender should ever ask this of you.
- Don’t let a lender talk you into borrowing more money. If you qualify for a larger loan than you need, don’t take that extra money. You’ll end up paying more in interest than the extra money is worth, so don’t be tempted and don’t let the lender talk you into it.
- Finally, do not work with any lender who refused to give you copies of a document you’ve signed. You have the right to a copy of anything you’ve signed or will be asked to sign.