What are some loan scams that I should be aware of?
A loan scam would be any loan you take without fully understanding the loan terms. Have the loan officer explain the loan to you in detail, especially ARM’s (adjustable rate mortgages). If they can’t explain it so you understand, they probably don’t know what they are doing either, so watch out. Be very careful if a lender offers something that sounds to good to be true; it probably is. Be wary of “bait & switch” tactics. For example, say most everyone is at about a certain rate but one lender promises 0.5% less than everyone else and will even put it in writing. This loan will never close at what you were promised. A common mistake is in thinking all ARMs work the same way. Some ARMs with extremely low initial rates adjust monthly and have caps near 20%. These are used for “lines of credit” by most lenders in the area. Some ARMs adjust only once a year, are capped at 2% a year and have lifetime caps of about 11%-12%. These are commonly used for large first mortgages. Think what may ha
