There are many unethical mortgage brokers and loan officers in the industry. They often use misleading marketing and ethically questionable tactics to get your business. Here are just a few things as a consumer you should watch out for.
"30 year mortgage” this is a phrase used in many marketing campaigns to mislead consumers to believe that the product is a 30-year FIXED mortgage. While there are mortgages with 10, 15, 20, and 40 year terms most mortgages are 30-year terms. While this advertising phrase is not a lie, your mortgage is for 30 years, most consumers infer that it is also a fixed rate when often it is some form of an adjustable rate mortgage or ARM.
You should watch out for misleading marketing about the pay option ARMS. There are many inexperienced mortgage professionals out there that either do not understand how these programs actually work or blatantly deceive the consumer about how they work. They are called a Pay Option ARM because they are an adjustable rate mortgage that gives you choices each month of how much you want to pay. One of those options is a negative amortizing payment option. This means that your loan balance will increase instead of go down. Be aware of this. You will also have an interest only option where you will only pay the interest on your loan and your loan balance will not go up nor down, but remain the same. Your payments and rates will change during the first five years. You are not on a fixed rate on these loans. These types of loans are good for some people, but NOT for everyone. If you decide this is a good mortgage option for you, then truly read the paperwork at your closing and pay attention to the details of the loan.
Another common ploy used by some loan officers is to give you, the consumer, inaccurate information about your credit scores and what affects them. Some loan officers will tell you your credit score is lower than it actually is. This will either prevent you from shopping around, or it will make their quote seem much better than any other quotes you may get when you tell the other loan officers the score.
Loan officers will also tell you not to shop around because if some one else pulls your credit it will drop your scores and he/she will not be able to get your loan approved. There are many resources you can check to verify that having some one else pull your credit will not drastically lower your credit scores.
If you ever have your credit pulled by a loan officer always ask for a credit score disclosure or a copy of the full credit report to be sent to you.
The Flat Fee loan is also a current marketing deception. It does not take into account third party fees such as appraisal and title company fees. Your closing costs add up to be much more then what is advertised
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