There are several cases where borrowers are often misled by lenders through different illegal practices. The lenders sometimes use dirty tricks to manipulate borrower's finances as well as their minds. But there is another side to the story which might prove that the lenders are not always guilty. Intentionally or unintentionally, some borrowers may also alter or twist the truth for the sake of getting a good mortgage deal. As a result, both lender & the borrower might get into a confusion which leads to a unsuccessful mortgage deal.
So, from the lenders' point of view, let us discuss those unfair measures which borrowers often uses to dupe lenders.
1) Hiding truth – Some borrowers hide the truth while applying for mortgage. They often convey a wrong or inflating income status or minimize huge debts such as student loan, auto loan or any other. Borrowers may also manipulate their financial status by denying credit problems (if any). Usually, this behavior only increases the chance of mortgage denial. Presently, mortgage loan procedure requires lots of paperwork which reveals the original financial background of a borrower. A person's pay stub is compared with the given application & credit report is thoroughly checked before giving approval.
2) Shop for rates – People sometimes call the lender or walk-in to the lender's office to ask him about current rates. They are mainly concerned about the best offer they can grab. It is totally wrong, because a lender can not tell you the best rate all of a sudden. It requires a lot of paperwork to verify your application & recognize your needs. The rate totally depends upon your mortgage type, mortgage terms, your initial down payment, your financial status & credit history etc. So, It is impossible for a lender to tell you which mortgage rate is best for you, without considering those factors. But some people, mainly new-home buyers don't understand the parameters & they might contact a new lender. Eventually, the mortgage process gets delayed.
3) Time expectation – Sometimes borrowers are expecting an unrealistic time for closing a mortgage. They come up to this conclusion on their own or through the real estate agent. A borrower may ask the mortgage broker about a fixed date of closing which is not possible for the broker to ascertain. Usually, it takes a bit time to complete the mortgage process which includes application submission, appraisal and closing. So, it is impossible to draw a deadline for closing.
4) Rate float – Mortgage rate lock is a assurance by the lender that a certain rate is fixed for the borrower for a stipulated time. It may be 30, 45 or 60 days period. Sometimes, borrowers do not want to get the mortgage rate “locked” & prefer to “float”. This may prove to be a risky move for the borrower as in future the rate might get higher than the current rate. Despite of knowing that fact, some borrowers decide to go for floating rate. When in future, the interest rate goes up, they demand to lock the previous lower rate. It is not acceptable to the lenders & the deal gets cancelled most of the time.
5) Wrong direction – Borrowers must be good listeners, lenders generally do not prefer to co-operate with those people who deliberately disobey their instructions. There are few chances for those people who only hear what they wanted to hear, they are less careful about what actually the lender meant to say. While in a verbal communication with lender, borrowers sometimes do not follow the instructions properly. The same happens in written format also. Borrowers ignore simple written instructions like mailing original documents or sending the credit reports by fax etc.
Apart from the borrower, some mortgage professionals also become headache for the lenders. These people are notably appraisers (taking too much time for appraisal process), underwriters (who do not give response at proper time) etc. Lenders always try to implement variety and flexibility in financing terms, but borrowers often take the advantage of this flexibility & make difficulties for the lenders to proceed the mortgage deal any further.