At the end of August, the Bush administration called for a more detailed disclosure of mortgage loan terms and settlement costs. However, if one were to read the Federal Deposits Insurance Commission (FDIC) laws and regulations (because they are such a fun read and we all have that much free time on our hands), one might be surprised to find that many tools are already in place to ensure full disclosure of said details. So, how can you avoid being yet another cautionary tale of mortgage mishap? Here are a few helpful tips:
Educate yourself. According to the White House Press Release, President Bush and his administration plan on enforcing a number of programs to promote consumer mortgage loan education. The home buying and financing process is not a simple process, and since a home purchase is frequently the largest purchase most people will ever make (real estate), it is something buyers should definitely take the time to understand.
A common complaint among borrowers, particularly those who took out subprime mortgage loans, was that they did not understand the terms of their loan. Thus, this is why some see education as an effective tool in preventing an inflated level of default mortgages.
Another common complaint among mortgage holders was that the terms of their loan had changed by closing. Thus, these homebuyers ended up with mortgages and interest scenarios that were not ideal for them or their financial situation. Had these borrowers been more aware of the different loan options that were available, they may have been able to avoid their current high cost loan. There are a number of tools, including the Internet, that you can use to research rates and find available loan options.
Don’t be afraid to scrutinize. While most of us probably sign documents that are placed in front of us in the blink of an eye, it is important to know what terms and conditions to which you are agreeing. In addition to general knowledge concerning mortgages, being familiar with the mortgage loan vocabulary can help you better recognize bogus terms or interest rates. The purpose of written documentation is to ensure that both sides understand the terms to which they are agreeing. If either side neglects to read the fine print, once they sign it, they have agreed to whatever is stated in the document, regardless of whether they meant to or not.
While the government will continue to create more safeguards to protect consumers, doing your part as a responsible borrower can ensure that you don’t run into any surprises down the road.
Source: Informa Research Services