As you begin the process of looking for a lender on a home, you will have a number of considerations to protect yourself. While most lenders are honest and eager to work hard to make your dream come true, there are some more eager to simply make a buck without giving the borrower much consideration. Therefore, we wanted to provide some mortgage borrower cautions so you can buy your home without major complications.
For one thing, be aware that if you have less than perfect credit, most lenders will want to be compensated for taking on the higher risk. Therefore, they will often require you pay points or higher interest rate than if you had good credit. Unfortunately, people with good credit have recently been caught up in a scam by which they are also being charged points and higher interest. Therefore, before you lock into any loan, check around to make sure you are getting the best solution possible.
Keep in mind that even while people with bad credit might pay more, there are still acceptable limits in the mortgage industry. For points, each is a fee that corresponds to 1% of the loan amount. With this, people that have excellent credit would likely not need to pay anything for points whereas someone with a marred credit history, they could pay four, possibly five points. However, some dishonest lenders will promise a secured loan to a homebuyer while charging them as much as 10 points.
If you have a low credit score, it might be a little more difficult for a lender to put the loan together but not impossible. This simply means that in addition to the lender working hard for you to get the loan at a good price you too will need to work hard by cleaning up your credit, saving more money, and so on. Remember that just because you have had a few bumps in the road from a credit standing, you should not be charged outrageous fees to buy a home. Therefore, if a lender starts racking up charges, you need to ask why.
Another important thing to consider is that in addition to your down payment, real estate commission, and some of the other more obvious fees, dishonest lenders will start locking you into a contract without disclosing the other less obvious fees. For instance, you need to remember there are origination fees, discount fees, yield spread premium fees, broker fees, and so on. All of these added together could mean thousands of dollars to you that you were not expecting to pay.
An honest lender will walk you through the entire process of buying a home, making sure that you understand not just the legalities but also the finances. In fact, a good lender will tell you upfront if you should wait to secure a loan at better rates by waiting until you worked on your credit or came up with a better down payment. After all, it would be best to wait and get the home of your dreams rather than just settle for something for the sake of owning a home.