In this new age of technology we’re living in, the Internet is often the primary tool people use to find and buy a home. One glaring drawback, however, is the opportunity it presents for scammers to defraud unsuspecting homebuyers.
This doesn’t have to happen to you. There are precautionary measures you can use to ensure that you don’t fall prey to mortgage fraud.
According to experts, nearly 82 percent of potential homebuyers begin their real estate and mortgage shopping online. It’s quick, easy and a fast way to obtain details about homes, lenders, terms, rates and available programs. Payment calculators and qualification tools are easily accessed that can assist you in determining how much you can afford, how much of a down payment will be required and renting versus owning.
When considering a mortgage loan, you’ll want to consider several factors – interest rate, down payment, fees, points, closing costs and the service provider’s history. You can find great loans online or you may prefer to obtain one from a local mortgage lender. Either way there are some considerations you’ll want to keep in mind.
Online lenders tout a streamlined, automated application process, and that they pass the savings on to the customer based on expenses saved from having a virtual branch office, instead of brick and mortar. Unfortunately, there have been many long-distance lenders that have defrauded potential homebuyers.
Some methods used are to take your money and not provide services promised, or promise a low interest rate at the onset, but end up with a much higher one at closing. Unfortunately, bait-and-switch schemes are fairly common in the mortgage industry, and the Federal Trade Commission (FTC) has prosecuted many lenders for this particular kind of fraud.
So, with all that’s available online, how can you avoid a scam?
Here are some considerations you’ll want to keep in mind:
• Prior to applying for any home loan, decide what type of loan you want – traditional, adjustable rate mortgage (ARM), etc., amount you have for a down payment, desired length of loan term and if you will want to pay for points on the loan.
• Beware of deals that sound too good to be true – they most likely are! Stay away from sites that tout “Cash back at closing” or that promise loans to those who cannot qualify. Most likely, they are fishing for victims. Look for the Better Business Bureau logo (BBB) and real estate accreditations that show the site is reputable.
• Fill out the online application as thoroughly and honestly as possible, so that you will be matched to the most appropriate lenders.
• Remember that rate quotes and pricing information comes from lenders, not from the site itself.
• Request a Good Faith Estimate (GFE). You need a disclosure of all costs, including rates, points and all fees charged by the lender. Some lenders are hesitant to do so, but insist on it. For fixed rate mortgages you need to ask for the interest rate, fees and points. For ARMs, also request the interest rate index, when the rate will adjust, margin, all rate adjustment caps and maximum possible rate.
• Always get rates, quotes and GFE in writing. Ask that they be e-mailed to you or sent to you via USPS mail.
• Keep in mind, points and interest rates are only applicable for the day you receive the quotes. If you don’t lock in the loan, rates and points could change on subsequent days based on the market, which could end up being either higher or lower. Also, you can’t compare quotes received on different days from different lenders – e.g., don’t compare a quote received from Company X on Monday with a quote received from Company Y on Thursday.
• Once you select a lender, make sure you choose a local title company to manage the loan process, instead of using one recommended by the online lender. Closing with a reputable, local title company will ensure an honest transaction and protect you from title errors.
Shop aggressively for the best rate, terms and programs available. Fill out online forms and get quotes. Take the information you’ve obtained and shop around for local lenders. Let them know that you’ve submitted your information to online lenders. You never know, the sense of competition may assist you in negotiating better loan terms.
And after you find the perfect mortgage, head over to roost.com to find the perfect home.
