Bad Home Mortgage Signs
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by: marciafreeman
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Do you need a home mortgage? How badly are you in need of a home mortgage? There is a class of mortgage lender that hopes you need a new mortgage very, very badly, and theyre exactly what you dont need when youre in a tight financial spot. Here are the top five signs to watch out for when youre considering mortgage lenders:
* Aggressive marketing. Legitimate home mortgage lenders do not need to seek out borrowers; borrowers come to them. On the other hand, disreputable lenders are always on the prowl for new customers. Predatory lenders use hard sell tactics, junk mail campaigns, and telemarketing, and even more suspiciously, they market door to door. Avoid any lender who uses these marketing tactics.
* High interest rates. Interest rates on bad mortgages are usually markedly higher than the market average. Some lenders target borrowers with poor credit ratings, since such borrowers have difficulty getting a home mortgage from a legitimate lender and are more likely to accept a high interest rate. Others simply hope the borrower will be too inexperienced to know the interest rate is too high. Predatory lenders often suggest dealing with the high interest rate by refinancing, or "flipping," the home mortgage frequently.
* Sky high fees. Legitimate mortgage fees might look staggering on paper, but they dont come to more than 1% of the amount of the mortgage. Bad mortgages frequently come with fees of 5% or more.
* Yield spread premiums. This official sounding piece of jargon is a euphemism for a kickback paid to the broker for finagling you into taking on a much higher interest rate than you would be qualified to get from a legitimate lender. Legitimate home mortgages never have yield spread premiums. If you see one on a home mortgage you are offered, not only does it mean the mortgage is bad, it also means you could get a much better interest rate elsewhere.
* Prepayment penalties. This is a charge for refinancing or paying off the mortgage early. While legitimate mortgages very rarely have a prepayment penalty with a short term tacked on, predatory lenders routinely discourage you from refinancing to a better lender with prepayment penalties for terms of three years or longer.
If you see any of these signs, back off and look elsewhere. No matter how badly you need a home mortgage, you dont need one as bad as the ones these lenders will sell you.
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