A magicians true power does not lie in the ability to bend the laws of physics, rather it is hisor her power to get their audience to watch their right hand as the left one commits an act of deception with a sleight of hand maneuver. This power of illusion is the magicians true power. This power is also a common trait of con artist and unethical business practitioners. In the real estate world there have been quite a few magicians working the lending angle. This set up for the bait and switch mortgages usually involves disappearing funds from the potential Home Owner. Find your dream home, without paying more than you should.
So what is a “Bait and Switch” mortgage? It is a magic trick. There will be an advertised mortgage rate that very few people would qualify for, but because the company can offer it to some segment of the population it is a legal advertisement. This highly coveted, but unattainable percentage rate, is the bait to get you into the office.
Once you have applied for the rate advertised, you most likely will find yourself disappointed in the fact that you don’t qualify. The lender will engage you about your situation with a very empathetic approach. Then there will be an offer to finance at a different rate, higher than what was advertised.
Another area to watch out for are hidden fees. Remember to never sign anything until you have had all contracts reviewed by your attorney regardless of how “standard” the mortgage broker claims the contract to be. Also ensure that you receive an itemized list of all fees you are going to be required to pay.
A borrower should also track market trends while applying for a loan. There is a time difference between when a borrower submits their loan application and when the loan rates are actually locked in. The rates are subject to the changes in the market. the market rises, your rate rises. the market falls, your rate falls. In the event that the market falls, some brokers fail to change the rate so make sure there have not been any significant changes in the market between application and signing the papers.
One way you can safeguard yourself from unethical lenders is to check and see if they have been reported to the Better Business Bureau. Not all unethical companies are reported, but this is an excellent start for checking references. Another great way to determine what is the legitimacy of an organization is to ask to see the loan commitment letter from the lender who is locking in the rate on the loan. This is a legitimate request and buyers should not work with anyone unwilling to show the loan commitment letter.
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Tags: buying a home, financing a house, fraud, mortgage, scam
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