August 12, 2011
Predatory lending and real estate scams are common no matter what the economy is doing; when markets are unpredictable and the economic picture isn’t as optimistic as usual, scam artists tend to come out of the woodwork. How can house hunters protect themselves from scams and schemes?
Sometimes the first step is knowing some of the basics. When it comes to applying for an FHA home loan, borrowers have rights which should be understood long before the search for a new home begins. Knowing your rights is a way to protect yourself from a range of things from simple high-pressure tactics that aren’t in your best interest, to outright fraud.
The FHA official site emphatically states, “ATTENTION BORROWER! This may be the largest and most important loan you get during your lifetime. You should be aware of certain rights before you enter into any loan agreement.”
Let’s examine some of those rights.
Did you know borrowers have the right to shop for the best loan and compare rates/terms between different lenders? You don’t need to feel self-conscious about feeling out a particular lender for terms and rates. Everyone in the real estate industry expects this to happen, and those who pretend it doesn’t aren’t working to help you–only themselves.
Borrowers have the right to be informed about the total cost of a home loan. That includes the interest rate, points, closing costs and other fees. You should always ask for a good faith estimate of all charges before committing to a loan OR paying fees. Your rights also including being an informed borrower–do you know what fees are not refundable if you decide to cancel the loan? Ask–it’s your right to know.
If you use a mortgage broker you have the right to know the exact services which will be rendered, how much they will cost and when you must pay. Did you know you also have the right to know how much the borrower pays the broker as opposed to how much the lender pays? That is part of the “transparency” in the lending process required by law. Any attempt to skirt such transparency is a definite warning sign to be mindful of.
There are many other rights, but one very important one to keep in mind is the fact that you are entitled to a reason why a loan application is denied. Your lender must inform you as to the specific reason–you can’t simply be told “no”.
All of these rights are designed for your protection, to keep the system as honest as possible, and to insure a fair lending process for all. If you have any questions about these rights, call (800) 569-4287 for more information.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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