It’s important for borrowers to stay educated about the moral issues emerging in the hard money sector of the mortgage industry. Cory Ruppersberger aggregated a list of some key consideration that MUST be made before choosing the right type of mortgage loan.
Right Mortgage Loan
The mortgage industry has persevered through some turbulent times as of
recent years and the current climate of the real estate lending keeps on
creating worry among borrowers. Some private lending investors which
are considered hard money lenders specialists, for instance, give an
extraordinary return on investment to market investors, yet without
proper verifying a borrower’s credentials. Furthermore, one can
undoubtedly discover that not all lenders have their borrower’s best
interest in mind.
It’s important for borrowers to stay educated about the moral issues
emerging in the hard money sector of the mortgage industry.
Cory Ruppersberger aggregated a list of some key consideration that
MUST be made before choosing the right type of mortgage loan,
Licensing Requirements for Mortgage Lenders
In today's business world, anybody can assemble a site, print some
business cards, and open a company. Unfortunately, it’s become easier
for lenders to offer such predatory loan products. Some hard money
lenders and private capital investors have been offering real estate
investors, promising financing capital for investment opportunities, in
spite of not having the necessary licenses to do so.
Before picking a hard money lender, always make sure to check your
state's applicable department or the NMLS (National Mortgage Licensing
System) for license information. If the money lender can't produce this
required license information, look for a qualified professional! While you
may have received an extremely luring offer, there's typically a catch –
and you may lose application and appraisal fees by using a fraudulent
Predatory Lending Practices - Check the Fine
Numerous borrowers especially the elderly, have received offers for home loans that tout
"no installments for 12 months". These loans were commonly referred to as “negative
amortization loans“. These loans looked to be appealing at first, as they clearly give the
mortgage holder a "teaser payment period" to move in and adjust to the current monthly
payment. In any case, what the lender neglects to disclose is that once the “teaser period”
is over, the monthly payments adjust to an amount in excess of the borrower’s monthly
budget. The borrowers may struggle to make the monthly payments, and within months,
are falling into an undesirable foreclosure situation.
Avoiding such consequences are simple, however, it requires a financial understanding to
evaluate these fraudulent loan products. Most of these products have been eliminated by
state and federal loan regulations but it is still important to evaluate the terms of your
loan with the following questions. Can afford to make the payment if the loan will adjust?
How many years is the fixed interest rate period for your loan? Make sure your loan
originator provides you clear answers regarding your loan terms or find a lender that can
summarize this information for you in a concise way.
Be Careful of Unscrupulous Tactics
A lender offers you a loan to get a
home. The payment on this home
loan appears somewhat out of your
monthly budget, yet you are so
excited about owning your own home
that you trust the loan originator
when they say "We've investigated
your financial accounts, and you can
DEFINITELY qualify for this property."
Why wouldn't you trust them? After
All, it's precisely what you wanted to
hear, isn't that so?
Loan goes to settlement and everything is great, right? Not so fast
What you didn't know is that the loan originator KNEW that you couldn't
afford the payment for this home. Many of these lenders have designed a
loan program that forces you into foreclosure so they can retain the home
for a profit!!
State and federal regulators have been successful in prohibiting such
lending practices in recent years, but it is important for you to ask for clear
information from your lender on the terms of your loan so you can avoid
this costly mistake. Before signing your name on a hard money loan, make
sure to refer to these tips.