Spotting Predatory Lenders: Deception, Interest, Debt Cycle

In part one of this two-part blog series, we went over some of the top signs that you might be dealing with a predatory mortgage lender. While we wish such entities did not exist, sadly there are some within the mortgage world who, rather than attempt to assist clients for mutual benefit, simply try to pull the wool over their eyes and take advantage of them in several ways.

At Primary Residential Mortgage in Houston, we’re here to ensure this doesn’t happen to you. We offer several quality loan programs, including programs like the FHA loan that are often ideal for first-time buyers – typically those at some of the greatest risk for mortgage scams, as predatory lenders often target inexperienced buyers first. What are some of the other indicators that a lender you’re researching is predatory, and how can you be sure to avoid these risks?

Deceptive Presentation

One of the top tactics predatory lenders will take involves trying to confuse you with some of the details – and because mortgages come with lots of details, you can understand why. Numbers are a top area where predatory lenders may attempt this sort of thing, especially within interest: A lender may try to make your interest number seem different than what it really is, sometimes by expressing a monthly number as yearly to throw you off.

Be sure you look very carefully at any and all data involved in a loan application. Ask for the Annual Percentage Rate (APR) when discussing interest rates – this is a full, complete expression of your yearly interest expectations. If a lender refuses to give this to you, you should not work with them.

Interest Rate Concerns

Speaking of APR, it’s vital to do the math on the interest rate you’re being given to confirm that your interest will not exceed your principal loan amount paid. Often with the assistance of a realtor or one of our loan officers, it’s easy to calculate whether you’ll be charged more for the loan than the amount you need to borrow – in which case you should not move forward.

Debt Cycle

Often connected with ridiculous interest rates is the realization that, if you move forward with this sort of predatory loan, you’ll be stuck in a hugely damaging debt cycle. Your interest will keep going up month after month because it’s too high for you to pay off on a robust monthly basis, trapping you into a cycle of interest fees and debt.

Bank Account Access

Finally, while it’s normal for lenders to offer direct withdrawal options to borrowers, any lender who requires your bank account or a backdated check should not be trusted. They may be looking to commit outright fraud and remove unapproved funds from your account, or could be looking to alter a check illegally.

For more on signs that often identify a predatory mortgage lender, or to learn about any of our home loan services, speak to the staff at Primary Residential Mortgage today.

*PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Opinions expressed are solely my own and do not express the views of my employer.

Spotting Predatory Lenders: Rushing and Misrepresenting

While the majority of mortgage lenders on the market today are reputable and legitimate, there unfortunately remains a segment of what are known as predatory lenders. These are individuals or companies who are not out for the mutual good of themselves and their clients, but rather who have the goal of convincing clients to sign up for loans that are highly costly and often trap them in long-term cycles of debt.

At Primary Residential Mortgage in Houston, we’re here to help. Not only do we offer numerous verifiable mortgage programs, from conventional to FHA loans and more, we also help with down payment assistance and numerous other areas – and we have the long-term client history and local reputation to back up everything we do, ensuring our clients are never at-risk of predatory loan concepts when working with us. However, if you’re shopping around various lenders, a totally normal part of the early mortgage process, you might run into some red flags with other companies that signal predatory tendencies – this two-part blog series will go over a number of such indicators to be very careful about, or even to use as a legitimate reason to never work with a given lender who you’re concerned is predatory.

General Rushing

Generally speaking, any mortgage lender who is rushing you through the steps of an application is not doing so for legitimate reasons. Any good loan officer will help you read through and understand the application and loan clauses, plus will encourage you to take the time to go over all the details yourself and confirm them.

If a lender doesn’t give you this time, or pressures you to sign documents without reading them, this is a major red flag. It often signals that they’re trying to slip something by you without your knowledge, and you should never comply – plus should strongly consider finding a new lender.

No Credit Check

Another major red flag is a lender who offers you a loan without checking your credit. There are many loans designed for those with lower credit, but how does a lender know if you need one of those without even checking? Walk away if this is what’s being offered to you.

Misrepresenting Info

In other cases, shady lenders will tell you to fake or misrepresent certain areas of information on the mortgage application, such as your income or debts. Simply put, doing this on a mortgage application is illegal and represents fraud, and any lender advising this is not to be trusted.

Blank Fields

Another untrustworthy sign is a lender who sends you a contract or paperwork to sign with blank fields as part of the document. This gives a shady individual time to fill in details later after you’ve signed, then claim they’re legally binding. Rather, be sure every space on a loan contract has a value, even if that value is “N/A,” and that you have a complete copy of the contract at the time of your signature. If a lender won’t allow any part of this, walk away.

For more signs of a predatory lender you should watch out for, or to learn about any of our reputable mortgage loan services or mortgage rates, speak to the staff at Primary Residential Mortgage today.

*PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Opinions expressed are solely my own and do not express the views of my employer.

Taking the First Step Toward Homeownership

For those who have been considering buying their first home for some time, taking that first plunge into the mortgage world may seem intimidating. But for those who are ready, entering homeownership is extremely beneficial in several ways, from building equity in an investment to being your own landlord.

At Primary Residential Mortgage, we’re proud to offer numerous mortgage lender services, including programs like FHA loans and others that are often ideal for first-time homebuyers entering the market. We’ll also assist you with several other elements of entering the mortgage application and home loan world, plus will advise you on whether this is the ideal timing given your financial situation and desires for your home. Here’s a primer on why owning a home is so advantageous if you’re able to move forward, plus the first step you should take if you’ve made the choice to do so.

Advantages of Owning a Home

There are several advantages of owning your own home rather than renting, including each of the following:

  • Building equity: A home is an investment, one you’re paying toward greater and greater ownership in as you move forward with your mortgage. Each mortgage payment increases your equity in your home, equity that can be used for a variety of purposes, including covering future expenses or refinancing.
  • Your own landlord: When you own your home, you have no landlord other than yourself. No pet restrictions, no limitations on your design capabilities, and full freedom to control your space.
  • Savings plan: When you stop paying rent to a landlord, you begin freeing up money to build up as a savings plan in addition to mortgage payments.
  • Stable payments: While rent tends to increase over time, even if you live in the same location, this is not the case when you own. Rather, with a fixed-rate mortgage, your mortgage rates and monthly payments stay consistent or even might drop over time as you pay them down.

Pre-Qualification First Step

If you’ve decided to move forward with your dreams of homeownership, pre-qualification through a lender is your best first step. This is a process where your loan officer will ask you about things like your income and what you can afford to pay on a mortgage payment, your current assets for a down payment, your credit score and history, and potentially several others.

After going over these details, your lender will be able to give you a price range of homes you’ll qualify to look at. They can also give you a pre-qualification letter that you can show to real estate agents and sellers to show them you’ve already investigated your purchasing power. While more official documents such as pre-approval will be needed eventually, pre-qualification is how you get the ball rolling on this process.

For more on the benefits of homeownership and the first step to take when entering this realm for the first time, or to learn about any of our home loan services, speak to the staff at Primary Residential Mortgage today.

*PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Opinions expressed are solely my own and do not express the views of my employer.

Impact of Refinancing a Mortgage on Credit Score

There are several important areas to consider if you’re thinking about refinancing your mortgage, from the impact it will have on your monthly spending to the long-term changes it might dictate. Another piece to be thinking about here: The impact a refinance may have on your credit.

At Primary Residential Mortgage, we’re happy to offer a wide range of mortgage programs and services, including for those looking to refinance a previous mortgage with a new one. While credit score isn’t the only factor to be thinking about with regard to a refinance, it’s definitely one to be keeping front-of mind. Here are some basics on how this process may impact your score, plus how to weigh those risks against the other benefits of refinancing.

Refinancing and Credit Score Impact

In some cases, refinancing may have a negative impact on your credit score. This can be for a few reasons:

  • Credit checks: Refinancing means applying for a whole new mortgage, and that means your credit score and history have to be run in what’s known as a hard inquiry – the type that lowers your credit score. And if you apply for several such loans, which many people do, your credit might drop significantly as a result.
  • Closing an account: Closing out your current mortgage also means you’ve closed a long-standing credit account, a factor that’s known to drop your score. However, as long as you’ve been paying this mortgage on-time, this area won’t drop your score very much – if you’re behind, though, it could have a big impact.

Now, this does not mean your credit will stay down permanently. Once you open your new mortgage and begin paying it down in a timely manner, your credit will go back up.

Weighing Vs. Refinancing Benefits

At the same time, there are several benefits to refinancing that might make a slight drop in credit easily worth it. These include:

  • Lower interest rates, which also often mean lower monthly payments.
  • Shorter loan terms, allowing you to own the home fully earlier than expected.
  • The ability to cash out on your home’s equity, paying you out a lump sum that could be used for several different needs.

There are many situations where accepting a small drop in your credit score – which you know you can rebuild moving forward – is easily worth it to obtain these benefits.

Making Your Choice

And when it comes to making your choice here, the above is really the biggest factor to look at. If you know refinancing will drop your score significantly, are the reasons you’re doing it still worth that risk? If you’re unsure, don’t hesitate to speak to our loan officers for tips and expertise.

For more on the impact refinancing a mortgage will have on your credit, or to learn about any of our mortgage loans or mortgage rates, speak to the staff at Primary Residential Mortgage today.

*PRMI NMLS 3094. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Opinions expressed are solely my own and do not express the views of my employer.