How to Know Your Mortgage Lender Is Telling You Everything
Homebuyers who take out a mortgage loan from a lender cannot automatically assume that they are getting the best deal and that the lender is not taking advantage of them. Congress passed the Truth in Lending Act (TILA) in 1968 so consumers would be given the right to see the terms of loans, such as loan costs and interest rates, and compare them with those of other offers they have received.
Per TILA, if lenders do not provide certain information to consumers, then the latter have the right to rescind any loans offered to them. Congress amended the act in 1994 to protect consumers who fall victim to “high-cost” lenders. Since then, lenders who give high-cost mortgages must include additional disclosures as part of their transactions.
Getting the Straight Facts
Even with TILA it can be hard for consumers to know when a lender is being truthful with them and not hiding fees and/or absurd interest rates. To not end up becoming a victim of a dishonest lender, you have to know what to look for and what to ask.
You also have to know how to objectively evaluate the answers lenders give you, especially if they are not ones you want to hear. In fact, if a lender is telling you everything you want to hear (such as that they offer extremely low interest rates), an alarm should go off in your mind and you would be well advised to find a different lender.
When considering a particular loan offer, always ask to see in writing the loan’s annual percentage rate and the dollar amount of the regular payment. For variable-rate loans, consumers also need to see how much the interest rate and monthly payments can increase and what the maximum monthly payment can be. If a lender isn’t showing you facts on how much you are expected to pay each month, you need to look elsewhere.
Always read through a contract with a mortgage lender before you sign it. Ask to take the paperwork home so you don’t feel pressured to sign it immediately at their office. If a lender doesn’t let you take it to look over, this is another sign that they want to hide something from you. If you can’t understand everything in the contract, let your lawyer read it over and they can make sure everything abides by the law so you won’t have any unwanted surprises that empty your wallet.
The Right Lender Is Key
When buying a new home, the lender you choose can make all the difference in the world. If you take your time and look at several different mortgage companies, you will be better off and be able to take comfort in knowing that you have chosen the best one for you. Research multiple companies to see if they have a good reputation. Ensure that they give full disclosure to consumers. If during your research you see a lot of complaints about a company, you will know to cross it off your list.
Understanding TILA is one of the best ways homebuyers can stay away from predatory lenders. By knowing your rights and what information a lender has a legal obligation to tell you, you will have a better chance of coming out with a loan that has no hidden costs.