Beware of Predatory Mortgage Lenders

The Fair Housing Act (Title VIII of the Civil Rights Act of 1968) prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing related transactions, based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and handicap (disability).

When you are considering buying a home follow these 8 tips to prevent being a victim of predatory lending and discrimination:

1.     Do you research before applying for a mortgage loan

2.     Shop around to several lenders before making a selection

3.     Ask questions if you don't understand something

4.     Take the paperwork home and read it over, contact a real estate lawyer or law school student to help explain any legal terms and information you don't understand

5.     Make sure all of your questions regarding the loan are answered 

6.     Make sure you are comfortable with the terms provided

7.     If the terms keep changing find another lender to do business with

8.     When all else fails go with your gut instinct, if it seems too good to be true it probably is

Also refer to the Housing and Urban Development Fair (HUD) cHousing website for more information on predatory lending and how to protect yourself or file a complaint at hud.gov. You can also file complaints with HUD or the Consumer Financial Protection Bureau consumerfinance.gov or the Better Business Bureau at bbb.org. 

8 Hidden Costs That Homebuyers Should Know

Home inspection costs

Before you close on a house, the lender may require a home inspection, which can range from $200 - $600. However, even if an inspection is not required, it is worth paying a professional to evaluate the house so you can avoid spending money on hidden home repairs.

Taxes

Property taxes are prepaid at closing. You have the option of paying them through escrow or paying them on your own (waive). Usually paid bi-annually or annually and can as high as 4.2% of the sale price.

Homeowner’s insurance
At closing, you will be required to pay homeowner’s insurance because it covers any damage to the home, in addition to your personal property. Depending upon where you live, you may also need to purchase supplemental insurance for hurricanes, floors, tornados, earthquakes, and other natural disasters that are not covered under your standard policy. In addition, if you own any valuable items, such as jewelry, you can add additional coverage. The premium can be paid monthly, quarterly, bi-annually or annually depending on the company

Private Mortgage Insurance

If the down payment is less than 20% of the purchase price, the lender will require Private Mortgage Insurance (PMI). PMI protects the lender in case of default. Fees vary based on lender. However, once a homeowner has paid down the mortgage to less than 78% of the purchase price or has at least 20% equity in the home, PMI payments can be cancelled.

Escrow Account

An escrow account is mandatory for FHA and other loans and usually 1/12 of the mortgage premium to cover homeowners insurance and property taxes. Escrow accounts are mandatory for homeowners who have a down payment of less than 20%. If you do not have an escrow account with your mortgage, you are responsible for paying your insurance premiums and property taxes on your own. They can be paid monthly or annually. 

Closing Costs

Includes loan origination fee, attorney fees, prepaid homeowners association fees and taxes. The costs ranges from 2% to 5% of the home purchase price.

Appraisal fee

The cost for an appraiser to decide how much your house is worth to assess the appropriate mortgage loan amount. Costs vary by size of home, state and lender. Fees range from $250 to $600.

Lender's origination fee

Administrative fee charged by lenders. Varies by home sale price and lender. Fees range from a few hundred to $900.