Look out for the Warning Signs before Signing a Loan

If you are like most individuals, a home is going to be the biggest investment you will ever make ; therefore, when you apply for a home loan, whether it be to purchase a piece of property or to refinance the one you own, the best advice you can get is to go to someone you can trust. If you do not know someone you are comfortable with in the lending business, ask for a referral from someone you trust. Do not put one of your largest assets into the hands of just anyone. Also, it is good to shop around and seek information from several professionals.

According to the Federal Trade Commission, you may be signing on for trouble if a lender does any of the following things:

1. Encourages you to falsify your application information to get the loan
2. Urges you to borrow more than you need
3. Pushes you to accept payment terms that you can’t realistically meet
4. Fails to give you the required disclosures (e.g., APR, rescission rights, etc.)
5. Shows up at closing with a totally different loan product from the one you agreed to
6. Asks you to sign blank forms (perhaps saying something like, “It’ll speed things up. We’ll fill in the blanks later, trust me.”)
7. Denies you copies of documents you signed

When you apply for a home loan, you should verify several items. One of those items would be to ensure that the party you are dealing with has the correct credentials, such as certificates or licenses. Next, it is extremely important that you confirm that all of the information in your loan application is accurate and not fraudulent or misleading. Some examples of fraudulent or misleading information include, but are not limited to, inflating your income, including bogus investments, or including fictitious employment. Regardless of who is asking or the reason why someone is asking you to agree to include false information on your application, you must refuse to do so. If you sign a loan application that contains false information, you are committing fraud. Do not believe anyone who tells you otherwise!Such circumstances should be a red flag and a huge indicator that the loan program you are applying for may not be right for you and that you could end up being in a very bad situation. A loan program that would be right for you is one in which you are approved based on truthful information.

During the loan process and before signing the loan document, make sure you have in writing the following things: your loan amount, interest rate, closing costs, monthly mortgage payment, and the type of loan program you will be entering into. All this information may be obtained from the Good Faith Estimate (GFE) that you should receive from your lender. If your lender does not offer one to you, request one yourself, and do not continue to proceed until you receive one. Please note, however, that aside from the loan amount, interest rate, and type of loan program, the remaining information on the GFE is just an estimate. Some of the fees listed on the GFE may vary at the time of closing, but for the most part they should be pretty close to the fees you will be charged at closing. Also, it is important to know that the lender will not be able to estimate costs that include, but are not limited to, taxes that must be paid at closing or credits for heating such as oil, propane, pellets, etc.; therefore, the funds required to close may differ from the GFE by the total of said costs.

Of all the items and information, the most important thing is to make sure you know exactly what type of loan program you will be entering into. There are several types of loan programs out there, so make sure you are getting the loan program that is right for your financial and living situation. Some of the types of loan programs include fixed, FHA, adjustable rate, and negative amortization loans. The important thing is that before agreeing to enter into any type of loan program, you must inquire as to all the positive and negative effects of the program.

The last thing anyone wants at the closing table is surprises ; therefore, ask as many questions as possible throughout the entire process, because the more informed you are, the better off you will be and the better the chance that you will receive exactly what you want. Once you sign the loan documents, the lender is going to assume that you have read and understood each of the documents you have signed and that you are voluntarily entering into the respective loan program. The responsibility lies with you to ensure you are as informed as you can be and that the loan program you are entering into is the right one for you.

If after closing you determine that your loan program is a bad one for you, you will not have any legal recourse against the lender, as the assumption will be that you knowingly and voluntarily signed all the loan documents, agreeing to enter into the particular loan.

When refinancing, if you have signed the final papers but are in the rescission period, you do have the option of contacting the lender and rescinding the loan in writing. If you have signed the loan documents for a purchase and the loan has funded and been disbursed, however, chances are you will not be able to have the loan “fixed” to be what you would consider to be a “good” deal. In other words, the only way to reliably fix the problem is another (better) loan, or if that won’t help, you can sell the property. The lender is not going to amend the loan simply because you got a bad deal , which is why you must make certain that what you are getting is a good deal before you are stuck with it. If you go into the situation alert, with your eyes open, and do your homework, you can avert the vast majority of problems before they affect you.

Always remember: If it seems too good to be true, it probably is!

Attorney Melinda Alden is the owner of Alden Law Firm. She is licensed in Connecticut and Massachusetts. She can be reached at 860-648-2193.