Getting a mortgage is like walking through a mine field, if you do it very carefully and know what you are doing, you might get out alive. If you wander through it without help or wisdom, chances are you won’t be around very long. Be very aware of these common mortgage traps, because they are out there and will cost you money unless you can find a way to avoid them.
When dealing with affiliated title companies, sometimes you will end up paying much more for title insurance from some companies than others. If they are affiliated with a realty or mortgage company, the prices will be 20% to 40% higher, so don’t just go where your real estate agent tells you where to go.
“There’s no out of pocket expenses.” They say this, but in reality, you will end up paying the out of pocket expenses whether you realize it or not. They will add substantial fees, which are perfectly legal, but very un-necessary. In addition, you will find yourself paying a much higher interest rate than if you just paid the fees at a legitimate bank. Financing companies are not out there to give you charity, they are out there to make money and will get you to pay the out of pocket expenses one way or another.
Finally, there are a lot of instances of outright mortgage fraud. In this scam, a victim’s greed of sense of hopelessness is used against them in a very big way. A very common form of this is called a bailout or equity stripping. People who have major financial problems and are close to foreclosure are targeted. The rescue company will claim to buy the property at a substantial discount, lease it to the homeowner, and then sell it back when the person is back in good financial health. In some cases, this is a perfectly legitimate business practice, in others, it’s outright fraud.
Here’s what happens in equity stripping fraud. After the homeowner signs the lease, they will realize that the lease agreement is much worse than their actual mortgage. The leaser then realizes how large their lease payment is, and has to default in the lease, and then they evict the leaser and sell the home on the open market for a substantial profit.
Be absolutely sure that your mortgage company has a proven track record. A lot of companies are honest and are trying to help you, but there are people out there to hurt you, and you HAVE to be aware of them, or you could find yourself in a sea of trouble.