January 17, 2011
When a first time home buyer wants to apply for an FHA home loan, they have a lot of learning to do about the whole process. The marketplace is full of reputable lenders, but as with any industry there are some individuals and even whole companies with business practices designed to take advantage of the lack of knowledge a newcomer might have.
That’s one reason the FHA offers a collection of resources for house hunters which includes plenty of advice on how to avoid predatory lending. What should a new house hunter do to avoid falling prey to predatory lending?
The first step for many is to find a HUD-approved home buying counseling agency. Home buying classes and one-on-one counseling sessions can help a newcomer learn what warning signs to watch out for when it comes to predatory lending, but also the business practices of reputable agencies. Knowing when you’re getting quality help from a lender is just as important as knowing when you’re being scammed.
But in addition to these types of help, there’s a secret weapon that buyers have they don’t realize is at their disposal. Successful real estate agents in your area know who the “good guys” are and can tell you from experience what to avoid and which institutions are known for being fair and reputable.
Your real estate agent may be hesitant to recommend or condemn a specific bank, but they can warn you away from known scams, shady practices in the area, and lending products their buyers have had difficulty with in the past. The agent may know of a local scam that hasn’t been shut down yet, or there could be a reputable company that recently proved itself worthy after being challenged by a disgruntled buyer. In either case, the informed advice of an agent could be very helpful.
Always take advantage of the knowledge an established player in your local market has to offer–but remember to compare notes with what one local agent tells with with information you get from other sources–you may find the truth somewhere in the middle depending on the question. The most important thing is to ask.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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