With interest rates at record lows, many of us are tempted to borrow funds to either purchase or refinance a home. But would you be able to recognize a good deal from a bad one? Here are some guideposts to consider when shopping for a loan.
Avoid any lender who suggests or requires you to falsify information on your application. If you’re caught, you could be prosecuted and, if convicted, penalties range from fines to jail term. Even if the bank does not prosecute, they could require you pay the loan in full.
Do not allow yourself to be pressured into borrowing more than you need. The only reason a lender wants you to borrow more money is to increase his commission.
And, along the same line, don’t be pushed into accepting monthly payments you can’t afford. Even if you qualify for higher payments, your lifestyle may not allow you to use every spare penny to pay your loan payment.
Every lender is required to provide you with loan disclosures within three days of applying for a loan. If your lender fails to give one to you, he is breaking the law. The disclosure must include the loan’s annual percentage rate (APR) as well as an itemized list of closing costs. The APR is a formula that takes into account both the rate and the fees of each loan. It is a way for you to be able to compare loans of varying terms.
Be wary of terms that change during the course of the approval process. It is possible that rates and terms may legitimately change during the weeks of loan approval. But be sure to get an explanation from your lender. And if anything smells funny, back up and review all the paperwork again. You might even consider contacting another lender.
If your lender tells you it’s OK to sign blank forms, cancel the deal. You should NEVER sign a blank form.
And finally, if the lender refuses to give you copies of what you are being asked to sign, RUN!
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