Four Signs of a Potentially Bad Mortgage Loan

A crazy housing market prompts may homebuyers to take drastic measures. When unable to afford their dream home, many are willing to falsify loan documents, which improve their odds of qualifying for the mortgage. False information may include padding their monthly or annual income, or exaggerating their assets. In many cases, shady mortgage brokers encourage the manuever. Even if a homebuyer can successfully fool a mortgage lender and obtain the desired loan amount, the inability to afford the payment can cause financial ruin. Be truthful on mortgage loan applicantions. If a deceptive tactic is implied, choose another mortgage broker.

2. Borrowing beyond the Budget

Several online mortgage calculators are available to help homebuyers get a rough estimate of an affordable mortgage amount. Take advantage of these free tools and purchase a home that's within your budget. Rising home values and interest rates have resulted in a slight decline in home sales. Some lenders habitually approve questionable mortgage loans. Mistakenly, the borrower assumes they can afford the loan; otherwise, the bank would not have approved the request. This thinking is wrong because lenders don't consider certain debts when approving loans. These include auto insurance, health insurance, daycare, transportation, etc.

3. Different Loan Papers Presented at Closing

Once you arrive at the closing table, sign the loan documents, and obtain your keys, the process is officially over. Mortgage lenders are aware of the buyer's anticipation. Therefore, some shady lenders will change the loan at the last minute, and bring the new documents to closing. New documents may include a different interest rate, payment, settlement costs, etc. Failure to read the new loan papers could result in paying more for the loan. If this happens, put your eagerness to the side, and request time to review the documents. After the loan documents are signed, it's too late to dispute changes.

4. Requesting Signature on a Blank Document

New or inexperienced homebuyers fall victim to several deceitful practices. A common tactic involves the mortgage lender or broker asking the buyer to sign a blank document. Before signing any loan papers, analyze the paperwork. It should include information on the agreed upon interest rate, loan terms, monthly payment, pre-payment penalties, and closing costs. When information is not listed, do not sign the document. It may delay the process a little, but it's better than signing your name to a bad loan deal.