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Home equity lenderIn last two years the general trend for investing in the real estate as compared to stock market has increased in US.This is due to many factors such as reducing interest rates ,aggressive market tactics scant industry oversight etc. This has also contributed greatly to operating of some spurious parties coming up as Predatory home equity lenders.
It is indeed difficult to resist the possibility of getting loan at rock-bottom interest rates and negligible fee.This is when every body is taking loans and en-cashing the home equity. But it is better to be cautious in approach as some deals may not be as good as they look. So many times the conditions are changed in-between and one is left with no option but to either withdraw or accept a costly deal with home equity lenders. Even if one withdraws he looses that much of time uselessly.
As per Federal Trade Commission one should expect troubles if the lender does following few things
1.Encourages you to give wrong information about yourself in the form to get the loan.
2.Urges you to borrow more than you need
3.Makes you accept some difficult terms.
4.Fails to give you disclosures required by you
5.The final loan agreement is much different than what was agreed upon initially.
6.Asks you to sign forms that are blank
7.Avoids giving you a spare copy of the agreement
If these signs are not cared for in time then it becomes difficult to walk out of the deal as they insist on some payments etc. throughout and once they are paid one has no go except to go on with a damaging deal.
In general these Predatory home equity lenders try to target the borrowers who approach the sub-prime lenders as they donot qualify for the main banks loans etc. Some sub-prime lenders are good and offer proper loans to these people who normally may never be able to own a home. But Predatory lenders, however, take advantage of such neighborhoods constituting elderly, less-educated and non-English-speaking individuals by offering dubious loan terms that would drain equity and eventually lead to the loss of their homes. Nationally, sub-prime originations increased from less than $35 billion in 1994 to nearly $160 billion in 1999. The predatory hot spots, Texas and California, were even worse:
There are definitely people who are ripping others off. to the extent that there are individuals who are being placed in loans with interest rates and fixed fees that are much higher compared to that person's credit-risk profile.
There are now registered loan officers. These should be always approached and the bad people should be kept out of business. Their shady deals are very good to listen to and one has to be very much guarded while dealing with them. The authenticity of a mortgage broker should always be checked from your own community people and in general they should be asked to put everything in writing first.
How to choose a real estate agent
The first step in finding a home for you is to choose a real estate agent. The only way is to interview them as if you are giving them a job and ask many questions.
There are many lines of questions one can ask.. Market conditions should be asked. who are the people in the buying arena and what is the rate range being offered etc. They should also be able to explain where they stand with respect to their competitors and why they should be chosen.
The following is a list of probable questions that can reveal the depth of an agent
1. Do you work full time
It is good to have a full time agent but the advantage of the part time agent is he can give a full time attention to one client.
2. How long have you been in this business
It is good to have an agent with long experience.
3. How many have you sold in last 3 months
4. Were there any complaints in these deals
These should be cross checked from a local association.
5. Can you give phone nos. of your last client
These should be cross checked later on.
6. How many times do I hear from you
This should be properly discussed and finalized as per ones own liking. Once the agent has been decided you can go forward and choose a home for yourself. Your loan consultant may need to ask you the following :
1. The term of the loan. This is to be decided as per your paying back convenience.
2. The nature of loan i.e. Fixed or Floating rate. If your income is to remain steady then it is good to have a fixed rate but if you think your income will increase then it is better to choose the floating rate as you can get the advantage and if it is otherwise you shall be able to bear the changes in emi.
3. The down payment.This depends upon the paying capacity.The lesser the loan the better it is considered.
4. The need to pay off the loan quickly. No doubt the shorter the loan the lesser interest one has to pay but this makes higher emi to be paid.If the repayment becomes very difficult then a higher repaying period should be chosen which will keep the emi in affordable levels.
Some of the questions that should be cleared at the time of taking home equity loans are as follows :
1. What is the interest rate and whether it includes fees, mortgage insurance etc.
2. If it is a floaing rate then what is the earliest date of adjustment.
3. What is the maximum it can go to in one year
4. Is there any guide to which the interest moves
5. Is credit life insurance necessary.
6. Can any fees be relinquished
7. What is the prepayment penalty
8. Are additional principal payments permitted
Conclusion
There are lot of cases where people have lost their homes after falling into the hands of fraudulent brokers and signing the wrong papers and choosing the wrong types of loans with home equity lenders. There are also cases when a 15 year loan extended to 18 year loan at the end of the day and the borrower could do nothing as he had signed on the wrong dots. This is why it is always advisable to proceed with caution because if the proper care is taken using the equity in homes and a proper home equity lender is chosen then , at these times, when the real estate prices have risen in USA, taking the home loan is the best bet. With these the home improvements are being done which not only make the life better but also enhance the value of the house for some subsequent use of the equity.
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