Get a Mortgage Loan for Your Condo, It’s So Easy!

Get a Mortgage Loan for Your Condo-Its So Easy- 150x150Maintaining a house can be very time consuming and expensive. The owner of a house is responsible for taking care of the whole property and its surroundings. Repairing and maintaining the various parts of a house require significantly more time and money than repairing and maintaining a condo. Condos are a great alternative for those who don’t wish to deal with the hassle of owning a house, but there are several aspects of buying a condo with a mortgage loan that are different from buying a house. The differences between buying a house and a condo with a mortgage loan are mostly related to the fees that you will have to pay and the qualification requirements.

Prices for condos have decreased back when the housing market crashed and are recovering slower than house prices, so this might be a perfect time to buy a condo. You will find cheaper condominiums, but unfortunately, lenders have tightened their lending requirements because the condo market is so weak. When buying a house, you’re the only one that has to be approved for a mortgage loan, but when buying a condo, the condominium association must be approved, too. If the association has financial problems, there is a big chance that your mortgage loan application will be denied.

What’s Different When Getting a Mortgage Loan for a Condo?

Condominium prices may be lower than house prices, but the process of buying a condo with a mortgage is a bit different than buying a house with a mortgage. There are several aspects that you should keep in mind before getting a mortgage loan for your condo:

  • The association fees. When owning a condo, you are responsible for repairing and maintaining your unit, but keep in mind that the condo is part of a larger building that needs regular maintenance and repairs from time to time. The money needed for these repairs and maintenance work is raised by the condominium association. All condo owners will have to pay a monthly fee that goes into a fund to pay for maintenance, upkeep, repairs and other expenses. When finding out your debt-to-income ratio, your lender will also include the association fees in your monthly mortgage payment. Keep in mind that, over time, these association fees can increase, depending on how many repairs need to be done and on the cost of the materials.
  • Who backs the mortgage loan. Before buying a condo, make sure that it is approved for Fannie Mae, Freddie Mac and Federal Housing Administration (FHA) mortgages. If the property is not approved, you might have to pay a much larger interest rate and down payment. The FHA allows you to buy a condo with a much smaller down payment than on a conventional mortgage loan, but the Federal Housing Administration also requires that less than 10 percent of the condos have the same owner if the building is newly built. Mortgages backed by Fannie Mae and Freddie Mac require a higher down payment than the FHA and charge extra if your down payment is less than 25 percent.
  • Buying a non-warrantable condo. Condominiums that don’t qualify for Fannie Mae, Freddie Mac or Federal Housing Administration financing are called non-warrantable. Not being backed by the government makes these condos more expensive, with a higher interest rate and down payment, and much harder to find a mortgage lender willing to finance their purchase.

A condo is a good substitute for home buyers who find that owning a house involves too much work and cost. Condos are also cheaper than most single-family houses, but buying one using a mortgage loan is a little different than buying a house with one. However, a little research can go a long way and ensure that getting a mortgage loan for a condo can be a relatively easy process with no unpleasant surprises.

A Clever Guide to Mortgage Loans with No Documentation Needed

A Clever Guide to Mortgage Loans with No Documentation Needed- 150x150Similar to low documentation loans, a no documentation loan is a type of mortgage loan that requires very few documents in order for the loan to be granted. You essentially just need to sign an affordability statement which states that you are aware of how much you will have to pay back and that you can afford to pay back the loan. You won’t have to provide proof of income when taking out a mortgage loan with no documentation needed.

Unlike conventional mortgage loans which require a 10 to 20 percent down payment, no documentation mortgages require a 5 to 30 percent down payment, depending on what your credit score is. Home buyers with less than perfect credit score also have the option of taking out a no documentation mortgage through the Federal Housing administration (FHA), which insures mortgage loans against default.

Because no documentation loans don’t take long to be approved since there is little that your lender has to verify, and since they require so little paperwork to prove your income, these are typically mortgage loans for self-employed or for those with bad credit history.

How Can You Qualify for a No Documentation Mortgage?

Many people believe that someone who is looking for a no documentation loan must have something to hide, but that is rarely the case. This type of loan is preferred by people who are self-employed and can’t provide the proof of income for lender requirements in order to give out a conventional loan, people who are unemployed and can’t meet the requirements for a traditional mortgage loan, and people with a poor debt to income ration, but who can afford to pay back a mortgage loan without difficulty. It is true that someone who makes money from illegal activities can take advantage of this type of loan, but it is not why this loan was designed. It is estimated that approximately 20 percent of all borrowers have chosen this type of loan instead of a conventional one.

Even though this loan is described as a no documentation loan, there are still a few documents that you will have to provide for your lender. The lender will still have to see a credit report in order to determine how big of a default risk you are. Also, the property that you wish to buy will need a home appraisal so that your lender can determine if the money that you are borrowing actually represents the value of the home.

You could obtain a mortgage loan even without those documents, but the loan will probably be much more expensive. You should also keep in mind that this type of loan is only valid for the purchase of a single family home, town house, or apartment. Commercial property and manufactured homes can’t be purchased with a no documentation loan.

Another thing to remember about no documentation loans is that they typically require a higher down payment than conventional loans, and also come with higher interest rates and closing costs. Your credit also has to be in good standing, or the loan will be much more expensive and your mortgage application can also be denied.

Mortgage loans that have no documentation requirements are a good alternative for home buyers who don’t qualify for conventional loans, or for those who wish to take out a mortgage loan without providing too much info about their income. Before deciding to go with a no documentation mortgage loan, you should do a little research and find out if you can meet the requirements of a conventional loan, which can be cheaper and provide greater benefits.

Building Your Own Home? You Can Take Out a Mortgage!

Building Your Own Home-You Can Take Out a Mortgage-150x150If you are ready to become a home owner, but choose to build your own home, you can do it by taking out a type of mortgage known as a construction loan. This type of mortgage loan will allow you to use the borrowed money to build a home. The money will be paid by your lender in stages, based on what stage the construction of the home is in. The lender is involved in the building process for as long as construction takes, and will review the project at various stages.

Borrowers must also apply and get approved for a regular mortgage loan before they can be granted the construction loan. The mortgage loan and construction loan are usually bundled together in a construction to permanent loan, making applying and approval much easier, because you are essentially requesting only one loan.

Steps to Taking out a Mortgage Loan for Building a Home

Like with any other mortgage loan, there are several steps that you need to follow in order to receive a construction loan: find the best option for you, acquire the funds,  and begin building your home. Here are the most important steps to taking out a mortgage for the construction of a home:

  • Find out which type of loan works best for you. Similar to conventional mortgage loans, construction loans come with various options, like fixed-rate or adjustable-rate loans, long term or short term loans. Two popular options are taking out a short term, for example 1 year, loan which you can refinance into a regular mortgage after the construction has finished, or the construction to permanent loan which bundles the construction loan and the regular mortgage loan into a single loan. The second option seems more attractive because you’ll only be paying closing costs one time, unlike with refinancing when you will have to pay closing costs all over again.
  • Get pre-qualified. Getting pre-qualified will allow you to determine how much you can afford to borrow and what your payment will be. Also, before giving out a construction loan, your lender will most likely need to know what your intentions are, why do you want to build a home or if you plan on living in the home after the construction is finished. Depending on your plans and the lender, you may receive various interest rates, and have more or less options.
  • Shop around. Construction loans are a lot less popular than conventional mortgage loans, so you might have a hard time finding one, or finding a loan that will suit your budget and requirements. The best way to find a good construction loan is by shopping around and comparing offers from various lenders who are willing to give out this type of loan. Alternatively, you can hire a construction loan broker who works with several banks, and who can help you find what you’re looking for much easier.
  • Submit your loan application. After finding a good loan, from a lender with enough experience in construction loans, it is time to submit a loan application. Like applying for a conventional loan, you will have to meet certain criteria, and submit additional info about your construction plans. You will also be given the option of locking in the interest rate, or letting it float hoping that the interest rate will decrease before closing.
  • Sign a building contract with a home builder or contractor. The contract between you and the builder is included in something called the builder’s package, which also includes things like the builder’s resume, an item cost breakdown, and a list of all the required materials.
  • Obtain construction insurance. Builders are not required to be insured, but the whole process of obtaining the construction loan will go much faster if the builder has insurance. There are three types of insurance that a builder can have: course of construction, general liability and workman’s compensation.
  • Close on the loan and start building. If you have all the required documents and meet all the criteria, there is no reason why your lender should deny you the construction loan. The only thing left to do is pay the closing costs and start building.

Taking out a mortgage loan in order to build a home is a great opportunity for both people who want a home to their own specifications, and for investors who are looking to build a home and sell it for a profit. The amount that can be borrowed and the interest rates will probably differ between the two cases, but, with some research and proper understanding of how construction loans work, this type of loan can be a very advantageous option.

Is a No-Fee Mortgage Suddenly Ok? Ask the Experts!

Is a No Fee Mortgage Suddenly Ok- 150x150One of the reasons that may be keeping you from becoming a home owner is the large closing cost that comes with taking out a mortgage loan. Between all the fees that you have to pay when closing on a mortgage loan, you will end up paying several thousand before you even start making monthly mortgage payments. Add the required down payment to that, and you have a reason not to take out a mortgage loan.

Lately, many lenders have been pushing a no-fee mortgage loan, which may be the answer for someone who can’t afford to pay for the closing costs all at once. But, as with all the types of loans that are designed to help people who can’t take out a conventional loan, there are aspects of the no-fee mortgage which, depending on your situation, can make the overall cost of your loan much higher.

What is a No-Fee Mortgage?

Like its name implies, the no-fee mortgage is a type of mortgage loan that doesn’t require the borrower to pay any closing costs or fees. Fees for appraisals, processing, applications and many others are all waived, at the cost of paying a higher interest rate. Depending on each borrower’s situation, this might be the perfect solution, or something that will come back to haunt them later.

Closing costs can total over $5,000, so having these costs waived sounds really good for a borrower who also has to make a hefty 20 percent down payment when taking out a mortgage. This type of mortgage has its pros, but it also has serious cons. The decision of whether to apply for this loan should be based on each borrower’s individual budget and financial situation, not on the fact that you get to save several thousands in the beginning.

Pros and Cons of the No-Fee Mortgage

One of the pros of choosing this type of mortgage is that you will be protected against being overcharged on fees and closing costs. Usually, when a borrower shops for a mortgage loan, he or she only looks at the interest rates when comparing loans. Then, when the closing time comes, they are taken by surprise by all the fees that have to be paid. Lenders usually add several junk fees to the closing costs, driving the cost a lot higher than the borrower would expect. Because a no-fee mortgage requires the borrower to pay a higher interest rate and no closing costs, the borrower can easily compare loans from different lenders by just looking at the interest rate.

Another advantage of no-fee mortgages is that, even though the interest rate is larger, the rate that you are paying is tax deductible.

The largest disadvantage of a no-fee mortgage is that that borrower will have to pay a higher interest rate than he or she normally would, if they paid the closing costs. The higher interest rate is calculated by estimating the closing costs and finding the right interest rate that will cover them. The high interest rate can become burdensome over time, so it’s important to consider all aspects before taking out a no-fee mortgage loan.

Alternatives to the No-Fee Mortgage

The easiest alternative to the no-fee mortgage is to pay for the closing costs when the time comes. This is the best and probably cheapest choice, but it requires you to come up with a fairly large amount of money on top of the already expensive down payment.

Adding the costs to your loan amount is another alternative to the no-fee mortgage. With this option, your lender will roll your closing costs and loan amount together, and you will have to pay the entire amount, with interest, over time. The advantage is that you won’t have to pay all those fees at closing, but the disadvantage is that this means you will take on more debt.

No-fee mortgages are a good choice for borrowers who can’t pay the closing costs upfront. By waving those fees, more people can afford to become home owners, but it is very important to understand that the fees will still be paid through the higher interest rate. Because closing costs take a long time to recuperate with a conventional loan, the no-fee mortgage is also a great option for those who don’t plan on living in a home for a long time. Proper knowledge of your financial situation and plans can help you better determine if this type of mortgage is for you, or if you should take a more traditional route to becoming a home owner.

Tackle the Loan Closing Process with this Preparation Guide

Tackle the Loan Closing Process with this Preparation Guide-150x150The last step needed in order to become a home owner and secure a mortgage is the closing. The closing involves signing a number of documents and paying a few fees as well. This step can prove challenging and overwhelming for most people. Being prepared beforehand can make the loan closing less confusing and a much easier overall experience.

What is the Loan Closing?

When closing a loan, the ownership to a property is transferred from one individual to another, while the person who buys the property receives a mortgage loan. Loan closing is a fairly complicated process, and it involves key decisions that will save you or cost you money.

The closing takes place at the office of a closing agent with someone working for the lender or the title company. Sometimes the closing agent can be a lawyer that was hired by you or the lender. The closing agent’s job is to inform you of what documents need to be signed and collect all of the paperwork from the buyer, the seller, and the lender.

During the meeting with the closing agent, you will discuss and agree upon the terms of your mortgage, your loan will go into effect and you will receive the loan, and the ownership of the property is transferred to you. Completing all of these steps requires the reviewing and signing of several documents.

Who Attends the Loan Closing?

Depending on state law and local customs, several people will be involved in the loan closing. People who are usually involved in the sale of a property are the seller, his or her real estate agent, your real estate agent, and the closing agent, who will usually be an attorney or a closing officer who works for the lender. If you are buying a property together with a spouse or a partner, all the people whose names are on the mortgage will have to be present or have an appropriate representation. If you are buying a unit in a new development, such as an apartment complex, multiple homebuyers will be present at the closing. Sometimes the closing can be private with only you and the closing agent present.

You can also hire a real estate attorney to assist you with the closing. Some legal questions can’t be answered by the closing agent, so having a real estate attorney present is a good idea, especially if you are buying a property that is for sale by owner. Your real estate agent doesn’t receive the commission until the loan is closed, so having additional people represent you will make sure that your best interests are being protected. Hiring a real estate attorney may cost you some money, but it will help you avoid more expensive issues that could arise in the future.

What You Need to Provide

The closing agent and the lender will be responsible for getting most of the documents ready for your closing, but there are some that you will need to provide. One document that you will have to bring to the closing is your homeowner’s insurance policy and proof of payment. Many times the lender will need to take a look at your insurance policy before scheduling the closing.

Another document that you will have to bring to the closing is a check for all of the closing costs. You have the right to receive a copy of the HUD-1 Settlement Statement at least one day before the closing. All the fees that you will be required to pay should be negotiated before the closing.

Closing Costs

How much you will have to pay at closing depends on many factors, but here are some of the fees that you will need to cover before closing on the loan. You can find out from the lender how much this is going to cost you a few days before the closing.

  • Application fee. The application fee is determined when you apply for the mortgage loan, and it covers the processing of your application. This fee may include the property appraisal fee and the credit report cost.
  • Appraisal fee. Also normally charged when you apply for the mortgage loan, this fee represents the cost of an independent home appraisal.
  • Origination fee. Usually charged as a percentage of your mortgage loan, this fee covers the cost of processing your mortgage application and completing your loan.
  • Points. Points are fees that you pay to the lender in order to receive lower interest rates. Usually, a lender will offer you several mortgage loans with different interest rates. The lower the interest rates, the more you will have to pay on points. Points are also charged as a percentage of the mortgage loan. 1 point represents 1 percent of the loan value.

Documents that You Will Be Signing

During the closing process, you will have to sign several documents. Here are the most important ones:

  • HUD-1 Settlement Statement. A very important document, the HUD-1 Settlement Statement contains an itemized listing of fees charged at closing. This document will be signed by both the seller and the buyer, and it is also known as the closing statement.
  • Truth-in-Lending Statement. This paper contains the terms and conditions of your mortgage, including the APR and several other fees.
  • Mortgage note. This document is basically your promise that you will pay back the mortgage loan, repaying your debt with the lender. It also includes the penalties that the lender will charge if you fail to make your monthly mortgage payments on time.

The loan closing process may seem confusing, but it is your duty to inform yourself on all that this process entails and do your homework before buying a home. Not only will this make things easier for you when the time comes to close the loan, but it could also save you money. Seeking professional help from a real estate attorney is also a great way to make sure that your interests are protected and that you won’t have any unpleasant surprises with your mortgage loan in the future.

Bridge Loan vs. Home Equity Line of Credit

Bridge Loans vs. Home Equity Line of Credit-150x150You’ve decided to move to a new home and you are ready to make an offer. Unfortunately, you need to sell your old home in order to be able to buy the new one. You won’t be able to pay for a new mortgage loan before selling your current home, so you basically have only two options: a bridge loan or a home equity line of credit (HELOC).

Both the bridge loan and the home equity line of credit have advantages and disadvantages. It depends on your individual financial standing if one or the other is right for you. Before deciding on which one to choose, let’s go through a few of their advantages.

Advantages of a Bridge Loan

Bridge loans are short-term loans that you can get in order to pay the down payment on your new home. Lenders are always happy to help you with a bridge loan, if you qualify. The amount of the loan is usually small, around 3 percent of the purchase price. Here are the advantages that you will have if you choose to take out a bridge loan:

  • The bridge loan can be borrowed against the equity in your old home. This is possible while the house is listed, unlike with the home equity line of credit, where the financing must be set up before listing your current home.
  • Not required to make any monthly payments until your current home is sold. This is unlike you would on a home equity line of credit. The balance on the bridge loan, as well as the interest, is paid at the time the old house is sold.

Advantages of a Home Equity Line of Credit (HELOC)

The home equity line of credit is a type of loan where the collateral is the equity in your home. What makes the HELOC different from a conventional mortgage loan is the fact that you are not given the entire borrowed amount up front. After a maximum balance is established, you may borrow amounts up to the maximum, like you would with a credit card. Here are the advantages that the home equity line of credit has:

  • The interest rate and fees are lower than on a bridge loan. The downside, as we mentioned earlier, is that you must take out a home equity line of credit before listing your current home for sale. This means that you should plan ahead if you want to use this type of financing.
  • With this type of loan you also have access to funds in the future, without reapplying. These funds can be used for home improvements or repairs, and other recurring expenses.

At first glance, it seems that the home equity line of credit is the cheapest option when it comes to short-term financing. In the end, your personal finances are the most important factor in determining if a bridge loan or a home equity line of credit is the right choice for you.

How to Make a Down Payment and Mortgage on a New Home When Your Current Home Hasn’t Sold

How to Make a Down Payment and Mortgage When...-150x150Whether you have to relocate because of your job, or you just found your dream home, qualifying for a mortgage loan if your old house is still on the market will be difficult. Most likely, carrying two mortgages is out of the question, so you are looking for ways to buy that new home before selling the old one. This wasn’t an issue in the past, but the financial and housing crisis has made it very hard for the average home buyer to receive a mortgage loan in this situation.

[Compare the latest mortgage rates from dozens of lenders, updated daily.]

Before the Mortgage Crisis

Being approved for a new mortgage loan before you sold your old home wasn’t very difficult in the past, before the mortgage crisis. The process was as simple as finding a tenant and getting a rental agreement, and then the new lender would credit you with the rent income to compensate for the mortgage payment.

Companies that advocate strategic default have started to encourage buyers to abandon the old home and mortgage as soon as they found a new home and someone to rent the old one. This way they can avoid the negative effect that a foreclosure would have on finding a new home. This has made it a lot tougher for legitimate home buyers to be able to obtain a new mortgage loan in this situation.

Getting a Mortgage Loan Before Selling Your Old Home

Nowadays, requirements for getting approved for a new loan when you haven’t sold your old house have gotten much stricter. Freddie Mac, Fannie Mae, and the Federal Housing Administration (FHA) have made it a lot tougher to borrow money, in order to protect the lenders from people who would take advantage by walking away from their old home.

Federal Housing Administration (FHA) loans can still be given, even if you haven’t sold your old home yet, but there are a few strict qualifications:

  • New job or job transfer to a different location. Having to relocate because you found a new job or you were transferred from your old one and the commute is impractical from your current home.
  • Divorce. You are currently going through a divorce and are buying a new home.
  • Family size. You family’s size has increased so much that there is no longer enough room in your current home to accommodate all the members of your family.

In addition to that, it is required by the FHA that you pay the mortgage balance down to 75 percent of your home’s appraised value before you will be able to close on the new home.

Fannie Mae and Freddie Mac require that, in case your old home isn’t sold yet, but it is in escrow, you must have a reserve fund equal to the payments for 6 months, including property taxes and insurance, and you must bring a valid purchase contract. In case your old home is converted to a rental, you must provide a lease agreement, a copy of the check for the security deposit, and proof that the check was deposited. In order to qualify to use your rent income for the purchase of your new home you must have over 30 percent equity in your old home.

As you can see, buying a new home when your current home hasn’t sold is possible, but you will have to meet certain strict requirements. The best option would be to plan your move ahead, giving you enough time to sell your old home and also saving you a lot of headaches and hassle.

 

What is a Bridge Loan?

What is a Bridge Loan-150x150Also known as a swing loan, or interim financing, a bridge loan is a type of very short-term loan that is normally given out to an individual or a business until they can secure permanent financing. Bridge loans are commonly used in the housing market, and are generally used by home buyers who are buying a new home when their old home is still for sale. Bridge loans feature fairly high interest rates and must be backed by collateral, such as your home.

When you use a bridge loan to purchase a new home, but your old home is still on the market, the current home is used as collateral, and the funds from the bridge loan are generally used as a down payment towards your new home. In this case, the bridge loan will be repaid when the old home is sold.

[Compare the latest mortgage rates from dozens of lenders, updated daily.]

Advantages and Disadvantages of a Bridge Loan

When looking for a new home either to live in, or just for a short-term investment, you will most likely need a loan. Unfortunately, securing a conventional loan will take you a lot of time and will require you to respect some strict mortgage loan qualification requirements. Another problem you might face is that, if you plan on buying a new house while your current house hasn’t sold yet, you will most likely be denied a conventional loan, because you will be considered a higher risk for default. Your best choice in this situation is to take out a bridge loan, which features a few distinct advantages over conventional loans. Here are the most important ones:

  • Bridge loans are short-term loans. Most conventional loans are designed for people who want to pay for a mortgage or college tuition, and require you to pay the loan off over a long period of time. A long-term loan will increase your risk of suffering some kind of financial issue. Bridge loans, on the other hand, are designed to be paid off in full before you receive the long-term loan for your new home.
  • The option to choose when to repay the bridge loan. Bridge loans can be repaid before you receive the long-term mortgage loan needed to buy a new home, or after receiving this loan. If you repay the bridge loan in full and on time before you receive the new loan, you will significantly increase your credit score, allowing you to qualify for more mortgage loan options.
  • No set qualification guidelines. Bridge loans don’t come with any set limits or qualification guidelines, like a conventional loan would have. Bridge loans can also be turned into regular mortgages by the lender.

Of course, like any loan, bridge loans come with advantages and disadvantages. Here is what you should keep in mind before applying for a bridge loan:

  • Larger payments and penalties. Being short-term is an advantage that bridge loans have, but this may also be regarded as a disadvantage. Repaying the loan in a short period of time means that the monthly payments will be larger than with a conventional loan. Lenders are also stricter when it comes to late or missed monthly payments on a bridge loan. The fees and penalties are larger for a missed payment on a bridge loan than for missed payments on a conventional loan.
  • Dependent on more permanent financing. You may rely on the mortgage loan that you are applying for in the near future to repay the bridge loan, but there are no guarantees that you will receive that loan. In case not everything goes as planned, you will have to repay the bridge loan from your own pocket. Another choice would be to take out a new loan in order to pay the bridge loan, but that could lower your credit score, create new debt for you, and ultimately make it harder for you to receive financing for a new home.

Before deciding on a bridge loan, make sure that you understand what your rights and responsibilities are, and carefully weigh in on both the advantages and the disadvantages of this type of loan. Your financial situation is the most important factor to be taken into consideration before deciding which path to take.

Top 10 Signs of Mortgage Scamming

Mortgage Fraud-150x150Over the past 5 years, mortgage scams have risen by more than 75 percent. Many Americans have been rushing to banks and other financial institutions to take out a first mortgage, second mortgage or to refinance their mortgage. This gold rush has led to a significant increase of mortgage fraud. Some mortgage scams are purely operating websites only (virtual offices) as they obtain people’s credit information and disappear with millions of dollars from innocent citizens. Other scams come in different forms, so it’s important to educate yourself on what to look out for.

Reasons for the Rise of Mortgage Fraud

  • The rising demand. The demand for mortgages over the past decade has tripled compared to the last 40 years in the United States. This gold rush for loans from citizens has led to a massive increase in the levels of mortgage fraud.
  • Increased use of online services. Mortgage scams and fraudsters are at their best when working online. They create websites with attractive products, fast responses and immediate approval—features which obviously attract vulnerable borrowers. In most cases, they don’t have physical offices.
  • Ignorance of the law. A rise in mortgage fraud is also prevalent because many borrowers don’t know the law. Those with any banking or law knowledge, and some knowledge about the rules of Freddie Mac and Fannie Mae can therefore easily take advantage of borrowers.
  • Mortgages being viewed as a source of cash. Second mortgages and refinanced mortgages, depending on the terms and the lender in particular, always provide extra cash to the borrower. Since many Americans are in need of cash, the fraudsters take advantage of this need and rush to con the applicants.

Signs of Mortgage Scamming

  1. Upfront charges. Terming themselves as forensic loan auditors and foreclosure prevention champions, mortgage scams will ask you for upfront fees to offer you these services. They will offer to give you their report so that you can use it against foreclosure, reduce your loan, speed up the process of loan modification or totally cancel your loan. However, all of these are fantasies in the real financial world.
  2. Offer to do all the paperwork for you. They will often offer to fill out all of the necessary documents on your behalf. This is not the usual characteristic of a true mortgagor who requires you to do the paperwork yourself.
  3. Purchase loans are disguised as mortgage refinances. A purchase loan is actually an amount of money which is acquired in order to purchase cars, houses and other forms of property at variable or fixed interest rates. On the other hand, a mortgage refinance is a replacement of the existing obligation with a debt obligation under unique terms. Such a disguise will only lead to more problems than solutions.
  4. Falsified documents to support the loan documentation. They will easily accept fake credit reports because they know that all they want from you is money. They sign fake brokerage deals and lawyer’s agreements to start off the deal.
  5. Material misstatements. All the mortgage scammers are characterized by misrepresentation and omissions upon a lender or an underwriter in the process of funding, insuring or purchasing a loan. This has been released by the FBI and is one of the leading checks used to investigate mortgage fraud. These scammers also promise you that they will modify your mortgage in a bid to prevent a foreclosure regardless of all the circumstances surrounding you.
  6. Inflated and exaggerated appraisals. Normally, a mortgage company requires appraisal reports of a house from several appraisers so that they can make a comparison and pick the most reliable figure. However, scammers have an inflated appraised figure of the house which has only been prepared by a single appraiser to suit their selfish needs. This often translates to a huge down payment and high monthly repayments.
  7. High commissions and bonuses. Since they promise you “impossible” services, they will always ask you for huge fees for services offered and bonuses for the “guaranteed” results. They require high brokerage commissions because they offer to do everything on your behalf.
  8. Form of payments. Other than the usual mortgages which require you to repay in terms of bank transfer, mortgage scams have several forms of payments including cash, checks and wire transfer. These forms of payments are not only aimed at fooling you to recognize how advanced they are but also escape the rigorous audit process instituted by banks.
  9. Request you for the power of the attorney. Taking advantage of your ignorance of the law, mortgage scams ask you to confer upon them the power of the attorney so that they can use it to enforce the law.
  10. Invite you to leaseback schemes or equity strips. If you are languishing in problems because you are unable to repay your mortgage, then a mortgage scam will promise to help you come out of that situation quickly. To avoid a looming foreclosure, they will sign a deed over to a virtual rescuer in exchange for continuing to live in the home just as a renter. Meanwhile, the rent payments go towards buying your property back (in somebody’s pocket).

In case you’ve realized that you have been scammed then you should quickly report the incident to the Consumer Financial Protection Bureau (CFPB) for further investigations. If you are about to take out a mortgage loan, then be careful where you tread to avoid these huge financial scams.

Disputing a Low Mortgage Appraisal

dispute loan appraisal- 150x150Due to the downward trend of home values since the recent recession, home buyers have been facing a considerable challenge in dealing with low mortgage appraisals, which affects not only their mortgage options, but even the chance of the loan process falling through. While a lower-than-expected appraisal is not technically ‘wrong’, it may certainly reflect on whether a lender will approve the loan application or not.

As a rule, the appraiser is responsible for comparing home values with those of ‘comparable’ features within the surrounding market. Problems arise when a lender utilizes an appraisal agency that may not be familiar with the market conditions of a certain location, which will affect the home value. In turn, a particular market might be subject to high rates of foreclosures or short sales, or poor sales in general, which would cause an appraiser to ‘comp’ outside of the appropriate market.

The resulting appraisal affects the amount of funding the lender will allow toward the loan proceeds, and if the appraisal comes in below the loan pre-approval amount, the lender is forced to disqualify the loan. While the potential home buyer cannot direct or influence a property appraisal, there are procedures to challenge the results if necessary.

Steps to Challenging an Appraisal

Contract Cancellation – Most pending sales contracts have an appraisal contingency that permits buyers (and sellers) to cancel a contract due to a low appraisal figure.

Renegotiate – Buyers have the option of renegotiating an entirely new loan package. However, the seller must also accept the lower valuation, or the buyer may be forced to offer additional funds or concessions to meet the agreed sale price.

Challenge the Appraisal – The buyer can request a review of the appraisal, and provide any facts or details disputing the ‘comps’, or discrepancies in square footage or number of rooms to support the challenge.

Request a Second Opinion –  If the resulting appraisal review or subsequent challenge does not alter the outcome, the buyer can request the lender to employ a different appraiser, and one that may be better acquainted with the specific housing market in the area.

If you follow these steps, you will hopefully get a new appraisal that will meet your expectations. If not, you will have to decide how you would like to proceed.