Need Mortgage? Alternative Finance Often Masks Predators, Who Want to Steal Your House

So, your bank had just turned you down for a mortgage application. The same thing also happened, when you went to other banks in your area. How can those banking people be so blind? Don't they see that you are a hard working person? That you intend to repay them every penny?

That blemish on your credit report was a mistake. A greedy landlord reported you as a no-pay to the credit bureau, when all you were trying to do was to collect the money for repairs, which the owner himself should have done in a first place. You should probably have taken him to a court, but who has time or money for lawyers?

Anyway, in today's rising real estate market your new home should pay for itself in a very short time. Especially with the improvements you intend to do yourself. All you need is someone to lend you a mortgage, otherwise other buyers will snap this terrific opportunity.

You will prove to those bankers that they don't understand a thing about you. If they will not give you the money, there are always alternative lenders. They advertise themselves as helping people, who had been turned down by the banks. They don't care about credit reports. True, they charge higher interest, but they give you a chance to own property, and chance is everything you need.

Be careful, most of the alternative lenders are not in a charity business. The banks usually sell your mortgage on the secondary market to investment funds. They do it on the strength of your credit report. That is the reason they are so inflexible on this subject.

What will those alternative lenders do? Where they get the money to lend you? Some of them are predators. You might discover that they are in dire need to turn a quick profit of their own, since they themselves had borrowed the money. You might discover it sooner than you had anticipated.

First clue for future surprises might come at the closing. They suddenly hit you with a lot of additional costs. After all, they say, you are a bad credit risk, so we have to work harder for you. So what, you say, the banks can hit you with additional costs just as well.

Yes, but this time you already had agreed to pay higher interest rate together with a larger down payment. That already overstretched your financial resources to the limit, and those unexpected closing costs may just pull you over the brink. You have no more money left.

The lenders are unexpectedly nice about this matter. In exchange for some more contracts for you to sign, they provide you with an additional bridge loan. What you don't realize at this moment - you might find yourself in a technical default even before you start your payments. And the pressure to pay already starts to build up.

Never mind, you say. The raising value of the house will pay for everything. All you need is to complete those repairs and put it back on the market. "Those lenders are not stupid", - you say: "They should understand that as soon as I sell my house, I will be able to pay everything back. The market will continue to move up. The house will increase in price. I will have the profits."

Has it ever occurred to you that your lenders might have similar plans about your house, only they see themselves as entitled to the profits from its sale? Remember those additional contracts you were forced to sign at the closing? They stated that if you miss even one payment, the whole balance of the loan becomes outstanding and due.

What does all that mean? That means that they are demanding the money that they know you don't have. They also hit you with additional interest charges and attorney's costs. As the costs are mounting daily, they offer you to assign your house to them. They say: "It will be easier for you if we will sell the house and refund to you your share later".

If you still have a choice at this stage, realize that accepting this offer will be the worst mistake you can make. If they sell the house, they can present you with a list of "selling" expenses, over which you have no control. You might discover extensive "advertising" payments and "agents" commissions, which ate all your profits.

Be careful, when you decide to turn to alternative lenders. The banking industry is heavily regulated by law. Alternative lenders are not regulated at all. Some of them are decent people. However, the loan sharks, which are preying on people in need like you, too often present themselves as "alternative lenders".

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MORE RESOURCES:

Washington Times

The Truth About Mortgage Refinancing Revealed By Connecticut ... SBWire (press release), WI - 16 hours ago Westport, Connecticut based Mortgage Broker Don Caiati reveals mortgage refinancing secrets at a new web site that is full of free reports, a home buying ... Refinancing suddenly booms Honolulu Advertiser Lenders Backlogged By Refinancing Rush Washington Post Low Mortgage Rates Bring Refinancing Boom MSNBC Forbes - Washington Times all 25 news articles

Reuters

Average Mortgage Rate Hits 5%, Lowest in Decades New York Times, United States - 9 hours ago Of course, buying a home is a more lengthy process than simply calling up a mortgage broker to refinance, and activity typically slows during the holiday ... US Banks Offer Mortgages Below 5% After Fed Action Bloomberg Rates lowest since '71; time to refinance? Modesto Bee Long-Term Mortgage Rate Falls Again Wall Street Journal Forbes - Boston Globe all 650 news articles

Cardoza proposal could aid housing crisis Stockton Record, CA - 2 hours ago Under the Cardoza plan, the payment on that mortgage refinanced to 4 percent fixed rate would drop to $1194 a month. Contact reporter Bruce Spence at (209) ...

REFILE-UPDATE 1-US mortgage demand dipped before Fed move-MBA Reuters - Jan 7, 2009 The jump in applications during December may have been driven by homeowners already "on the fence" and prepared to refinance on a drop in mortgage rates, ... Mortgage applications down in latest survey Forbes Week-to-week mortgage applications down 8.2% MarketWatch Fewer apply for home loans; credit line delinquencies increase Los Angeles Times KVOA.com - Kansas City Star all 63 news articles

Boston Globe

Fed’s Rosengren Calls for ‘Concerted’ Fiscal, Monetary Policies Bloomberg - 4 hours ago ... to purchase or refinance homes,” Rosengren said. The average rate on a 30-year fixed-rate mortgage dropped for a 10th week to 5.01 percent yesterday, ... Rosengren sees path to recovery Boston Globe Fed's Rosengren says recession more severe than thought Reuters all 51 news articles

Los Angeles Times

Congressional Press Release on Mortgage Deal Wall Street Journal - 9 hours ago "Despite efforts by Congress to address this issue, not enough lenders have come to the table to help borrowers with bad mortgages refinance into new, ... Citigroup reaches agreement with key senators on mortgage ... Minneapolis Star Tribune Citigroup agrees to allow judges to help modify some mortgages IdahoStatesman.com all 526 news articles

TopNews

Question & Answer on mortgage refinancing Boston Herald, United States - Jan 1, 2009 If I refinance the mortgage on my current house, will I hurt my chances for getting a loan for a new place later on? A: No. Refinancing a loan shouldn’t ... MORTGAGES: 30-year Mortgage Rate Falls For Ninth Straight Week To ... CNNMoney.com Mortgage Rates Hit 37-Year Low Poynter.org 30 Year Fixed Rates Drop to 5.10 percent Best Syndication Wall Street Journal - Ventura County Star all 457 news articles

Refinancing shoots through the roof Plano Star Courier, TX - 15 hours ago “Quite a few people have remortgaged,” said Craig Jarrell, loan officer with Pulaski Mortgage. “Most people who refinance are new homeowners as recent as ...

Mortgage refinancing skyrockets Cincinnati.com, OH - Jan 3, 2009 ... 2009 With US mortgage rates the lowest in 30 years, local lenders say they've seen a strong surge in loan applications as homeowners seek to refinance ... Waco banks seeing a boom in mortgage refinance applications Waco Tribune Herald Borrowers seeking to refinance may face challenges WTOP As mortgage rates slide, refinancing applications take off Dallas Morning News all 15 news articles

The very good reasons to refinance Boston Globe, United States - 14 hours ago When I wrote about the hidden cost of the additional years of mortgage payments, several people wrote in with very good reasons to refinance anyway. ...

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