How to Avoid Predatory Sub Prime Loans
Scams to look out for when shopping for a Sub Prime Loan
Sub prime loans have been all over the news lately and some
individuals blame the current real estate crash on those same sub
prime loans. With all the news recently about the housing market
crash and the historically high foreclosure rate here in the united
states you might question why people would ever look for sub prime
loans and why in the world would anyone take one of these sub prime
loans to start with.
Sub prime loans were presented to borrowers who either had poor
credit which wasn't allowing many to qualify for one of the "A"
credit mortgage loans or those who were having problems proving
income. Most of the sub prime loans went into default because greedy
financial institutions relaxed their general lending guidelines so
that a even a squirrel with a pen could buy a house.
The sad part is financial institutions only care in the world was to show
bigger profits so their stock continued to climb, making the top executives
amazingly rich. They blatantly gave "A" paper negative amortization loans
and sub prime negative amortization loans along with main stream ARM's and
interest only loans to those they knew would fail.
Established sub prime mortgage lenders provide a
indispensable service to many borrowers looking to purchase
a home. By providing financing to those with unfavorable
credit, sub prime lenders with high morale corporate bylaws
offer a valuable financing options, although it seems
exceedingly hard to find one of those these days.
Nevertheless, predatory sub prime loan lenders do take
advantage of people with awful credit by charging steep
fees, forcing foreclosures, or taking deeds. To protect
yourself in your sub prime loan search, avoid these common
mortgage scams.
Sub Prime Loans with Extreme Interest Rates And Fees
Predatory sub prime loans usually require a borrower to pay
excessive upfront closing costs or steep fees. Some state laws do a
weak job of protecting consumers by putting limits on sub prime loan
interest rates or fees. If you have unfavorable credit, you should
be paying no more than 6% higher than a conventional "A" credit
mortgage loan. Limits on closing costs vary, but anything more than
four points should be viewed a scam unless detailed reasons are
given and explained in writing.
Sub Prime Loans that Force Foreclosures
Another sub prime lending scam requires lending to people so they
will be forced into foreclosures. These types of sub prime loans
usually have monthly payments so high, no one could possibly pay
them. They lure borrowers in by promising guaranteed approval, but
these sub prime lenders charge huge interest rates. Before you sign
a sub prime loan, be sure you can afford the monthly payments.
Demanding Title
A developing scam involves supposedly refinancing your sub prime
mortgage, but in reality the scammer is pocketing your cash and
title. There are many variations on this scam, but normally these
con-artists will solicit those who have liens against their home or
received a foreclosure notice. They make promises of resolving all
your financial troubles if you turn over your title and pay an up
front fee.
The scammer will then file for bankruptcy in your name that will
be dismissed since a 3rd party started the process, but it will
still leave a mark on your credit report. The scammer will also take
mortgage payments from you, even though they did not even pay off
the first mortgage. In the end you might lose your home.
You Must Protect Yourself
Protect yourself from scams by being a savvy shopper. Call For
quotes that include interest rates and fees from several sub prime
lenders before picking one. If you have any questions, talk with the
sub prime company. Legitimate sub prime lenders will be happy to
explain the process and answer any of your questions.
Once you pick a sub prime mortgage lender, be sure to read all
forms before you sign the paperwork. According to federal law, you
have 3 days to cancel your sub prime mortgage after you sign at
closing. You will also be refunded all fees, except for any
application fee that may have been involved, this charge is outdated
as no one should be charging you an application fee, even on a sub
prime mortgage.