Question:

What is the most common mortgage rip off?

Answer:

Many lenders and brokers have undisclosed practices that constitute a true mortgage rip off for the borrower.

Most common is the practice of the prepayment penalty. Since it is very likely that a borrower would like to refinance a high interest loan, a prepayment penalty will most often be included in the loan agreement but the borrower may not be explicitly informed since it is the borrower's responsibility to read their agreement.

To avoid paying a prepayment rip off, you have to ask the lender straight about prepayment penalties and where in the contract it is stated that "yes, there is" or "no, there isn't" such a penalty. Then, in case there is one, make sure it is shorter than or equal to the period you intend to keep the property but not longer.

Other common mortgage rip-offs are often related to the so-called junk fees and elaborate mortgage products. If you do not pay attention, you may be charged fees for non-existent services or forced to pay exorbitant costs for some services, such as for participation in a widely advertised loan program - the biweekly mortgage, for example.

Another mortgage rip off is the lender's insistence that you not shop for other loans as this could lower your credit score. True, credit score may be lowered but not by multiple mortgage inquiries within a two-week period. Rather, credit cards inquiries may affect it worse. However, go and shop for loans as many as you wish. Just find out what your credit report from the three credit bureaus is and cite it to lenders in order to get their quote before entering any kind of further commitment and disclosing more personal information such as SSN.

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