Whether you need a credit card to cover college expenses or a mortgage to buy a home, a high FICO score can help to lower costs.
Although not all financial lenders are dishonest or predatory, the possibility does exist that you might come across a less than savory one when you are looking for your mortgage. Fortunately, several tip-offs exist that can let you know right away that a particular lender may not be on the up and up.
If the lender that you are considering asks for more than one application fee or payment, most likely, he isn’t on the up and up. After all, it shouldn’t take several exchanges of money to get the loan or mortgage that you need. You should add up all of the fees yourself to make sure that the amount is correct.
Another tip-off that something might not be quite right is an attempt to talk you into borrowing a larger sum of money than you would like to borrow. Never borrow more money than you need. If you do, then you will be stuck with larger monthly payments on a loan that is larger than it needed to be.
Additionally, if the interest rate is excessively high, then you should consider going elsewhere for your loan. How can you tell if the interest rate is higher than it should be? Check the prime rate to discover what it is. If the interest rate that you are being offered is higher by more than six percent, then it is simply too high. The lender isn’t simply trying to make a living, he is trying to make his living from the profit he gets with your loan.
Watch out for extras that the lender tries to talk you into including insurance policies. The insurance premium might be added to the loan amount and factor into the equation when the monthly payment is calculated, thereby leading to a larger monthly payment. If the lender is suggesting that you buy every type of insurance that is being offered, you have to ask yourself why this would be.
Prepayment penalties are another aspect that you should avoid. Prepayment penalties insulate the lender from losing the loan should the borrower decide to refinance. Typically, the penalties are so high that the borrower is put off by them and foregoes refinancing to avoid the prepayment penalties. Otherwise, he refinances and ends up paying a hefty fine or prepayment penalty.
Pay attention to all of the details whenever you are acquiring a loan of any type. The small print is often the most important part of the document that you should read.
By Susan M. Keenan