If The Finance Deal Sounds Too Good, It Probably Is
Buying a home is a big undertaking and one that has implications for the decisions that you make today that could impact your wealth and lifestyle for years to come. You need to be extremely careful to get the financing right so that you can reap the benefits of a smart choice.
The financial services industry is gigantic and diverse; it accounted for $1.26 trillion worth of sales in 2014. While the majority of companies provide excellent service, there are a few that are unscrupulous, and in between there are those companies that maybe just push the hard-sell tactics too far. So let’s point out some of the selling tactics to look out for and take as signals to avoid particular real estate lending offers.
Watch Out For Deceptive Wording
“Low Fixed Rates” that are just ARM introductory periods – If the blurb says something along the lines of, “low fixed rate for the first five years,” that is a sure sign that the loan is an adjustable rate mortgage or ARM. While an adjustable rates are not necessarily bad, they can be worded deceptively and potentially leave the borrowers open to the risks associated with the terms and uncertainties at the time that the adjustment takes place.
“A great deal because it’s government backed!” – Really? Government programs, for example, Freddie Mac and Fannie Mae, “back” most loans that meet the conforming criteria by purchasing them as investments; such claims are misleading because they overstate the significance of that backing.
Refinancing Offers To Avoid
Unsolicited offers in return for information – In refinancing a home loan, it is always a safer policy to take the initiative. Do not respond to unsolicited offers that promise to find a great deal if you “just fill out a form.” The risk of getting scammed is just too high. The information that they ask you to give is exactly the type of information that identity thieves crave; you are better off just assuming that unsolicited refinance offers are scams.
Never pay fees up front – There is no good reason to pay a lender anything before closing. If they ask for payments up front, it is a sign that you need to go elsewhere for your refinance. Don’t do it, and don’t walk out, RUN!
Avoid prepayment penalties – How about your interest if you pay off the loan early? Who knows what will happen in the next five years? The pace of technological changes and politics are so volatile these days that you don’t want to be tied into some financial commitment, with a cash penalty as the only alternative. But this is what can happen with a home loan that has a prepayment penalty tying you in as part of the contract. Regardless of your present plans, always insist that your home loan has no prepayment penalties.
Information on what to avoid in real estate finance is not hard to find. A search of the Internet will return a list of the latest scams and scoundrels and how to avoid them. Researching the reviews of services on social sites, the Better Business Bureau and getting advice from trusted and disinterested parties is all part of the process of finding the right provider for your home loan.