Often Overlooked Warning Signs of a Bad Mortgage Company

Many factors go into assessing whether a mortgage company is worth their weight in salt. Most mortgage companies adhere to a stringent set of rules and guidelines, and need not be further investigated for their practices. However, there are also mortgage companies that do not uphold ethical lending practices.

Sometimes these practices are made manifest through qualifying someone for a loan when they simply do not have the means to stave off insolvency while under the loan’s contract. Even more frequently, a bad mortgage company devises loans with their own inherent issues, and it is not always the consumer’s fault when caught in the storm of a usurious lending practice. Here are some black hat lending practices often doled out by unethical mortgage companies — practices that can negatively impact anyone if they are not careful:

If a mortgage company asks for money upfront, it is a very sketchy sign. Not only is it sketchy, it can be an indicator of fraudulent activity on the mortgage company’s part. No matter how easy it seems to just say ‘Yes’ to such a simple request, saying ‘No’ will leave you better off in the future, even if it does mean taking the time to find another lender.

Furthermore, if one of the many mortgage companies out there asks for a potential signee to undergo an adjustable interest rate mortgage loan, (ARM) this isn’t an immediate sign to run for the hills, for these loans can be beneficial so long as they offer tradeoffs that benefit the person signing the loan. For instance, in exchange for less stability regarding the interest rate, a signee should have a higher number of favorable terms in their contract than someone who signs a fixed rate mortgage agreement.

If it seems like a mortgage company is pressing a greater loan amount, it may mean that this company belongs to a greater pool of companies who incentivize their loan officers to sell as many large loans as possible rather than find a loan that suits their signee. This is a major red flag that indicate the company does not have its clients’ best interest at heart.

Finally, be aware of exorbitant fees. Although some fees are legitimate and used to cover operating costs and other expenditures, be aware of ‘backdoor fees’ that do not appear in the loan contract’s agreement. Although these fees are rarely discovered, pointing it out in the court of law can impugn a mortgage company’s credibility.

James O’Connor is a finance and mortgage writer. Information provided by Castle & Cooke Mortgage (NMLS #1251). He writes for Fusion 360, an advertising agency in Utah. Find him on Google+

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