With so much paper work, laws, rules, terms of service, fees and legal responsibility, it can get a little confusing and overwhelming as to what your rights are. The way mortgage brokers and lenders operate their businesses may be different, but there are certain guidelines that they must always follow. If not, legal action can be taken against them.
By understanding the legal application of mortgages, you can protect yourself from predatory lenders and cheating brokers. Unfortunately these people do exist. The more educated you are, the better. If you know your legal rights, you can immediately remove yourself from a situation that could end up harming you or your bank account.
When working with a mortgage broker, always request a disclosure that you have paid for a credit report, appraisal, or appraisal report. This way, the mortgage broker can transfer any report to another mortgage broker or lender with full documentation. This disclosure will save you from having to pay more money for a report you have already paid for. When you ask the mortgage broker to transfer any of the reports, it must be in writing and then the broker must do it with in five days. You can not transfer the reports to another broker if you have not yet paid for the reports.
After the terms of your mortgage are settled between you and the lender, a rate lock disclosure form should be given to you. This form will document the rate in which you have locked your mortgage interest rate at and can not change. The form should also disclose the conditions in which the rate is locked. The rate is considered floating until locked. This form will protect you from the rate changing without notice.
With every mortgage you will have to choose a type of rate. Two commonly used rates are fixed and adjustable rate mortgages. With a fixed rate, the interest rate stays the same for the entire length of the loan. With an adjustable rate, the rate will fluctuate depending on the current mortgage rates at the time of payment. Whatever mortgage rate you choose, the broker or lender should provide you with booklets and disclosures in how the rate will adjust, or not adjust over time. All terms should be clear and easily explained in these booklets or disclosure. If you have any question about the rate, or something doesn't make sense, ask for the broker or lender to explain it to you. It is important for you to understand all terms and rates of the mortgage.
Within three days of submitting an application for a mortgage loan, you must be acknowledged by the lender or broker and be given written documents with most of the information regarding the mortgage you applied for.
After the terms are finalized, a Good Faith Estimate (GFE) should be discussed. This GFE of closing costs is the broker's or lender's estimate as to how much it is going to cost to close and complete the a specific loan. If there seems to be a considerable change in closing costs, a new GFE must be given to you showing the changes and costs increase at least three days before you sign. Every cost increase must be documented clearly. Even in the case of a new GFE, a lender may have to give you back some funds of the increased costs.
Another document you should receive is a Truth in Lending Disclosure Statement or TIL. This document will show the annual percentage rate including the loan fees to be earned by the broker and lender. You should be able to compare annual percentage rates from other lenders and brokers so that you can get the best deal for your financial situation. On this document you will also find the type of rate and if there are any prepayment penalties. A prepayment penalty is a fee that a lender will charge if you pay off the loan before the end of the entire life of the loan.
The point of all these forms and disclosures are to make sure you know every aspect of the mortgage loan. This in effect, protects both you and the broker or lender from wrong doings or misinformation. If a broker or lender is not willing to give all this information freely, then go with another lender! The mortgage industry is highly competitive and someone else will be happy to disclose all information and give you a good deal!
John R Blakefield is a mortgage and real estate specialist. For more information, articles, news, tools and valuable resources on home mortgages or investment loans, refinancing, debt solutions, visit this site: http://www.scourtheweb.com/mortgage.