Read an Excerpt
( from Chapter Two, Some Things to Beware Of)
Some unethical lenders use the old bait and switch routine. They will advertise or tell you on the phone that they have a certain loan program or interest rate available and then when you get there it is not available to you for one reason or another. They even may take your loan application (and your application fee) and wait a week or two before informing you of the change.
Or even worse, all along you were told you are getting a 7 percent interest rate and your total closing costs are $2,000. You are approved, no problem! You get to closing, you notice your rate is now 7.375 percent and your closing costs have gone up to $3,200. You think there is some kind of mistake so you call the same numbers and you get the same old voice mail from your loan officer. Except this time you don't aget a call back. You are sitting in closing; your apartment has been leased; your furniture is sitting in a moving van; the seller is in the outer room; his furniture is sitting on the truck; the seller of the house he is buying is coming in to close in 30 minutes... Get the picture?
You say, "Wait, I can close. My rate is too high. My closing costs are all wrong... I do not know why my loan officer has not called me back, she has always been very responsive." Sound familiar? You have just been had by a system that in many states will allow a lender to do just what we have described. Did you think the deal was too good to be true? The unscrupulous lender must made more on you than any other legitimate lender you may have talked to when you were shopping around. You may be thinking, "No problem, " could just delay closing." But you can't.
The problem is that the seller could care less about your problems and he has a contract that says you are going to close. If you refuse, you are in breach of contract. And where are you going to stay tonight with your furniture? The lender has made a high percentage guess that you will be forced to close.
If you show up at a car dealer and you have ordered a red car and when you get there the dealer rolls out a green one, what do you do? You get in your old car until the dealer does what he has promised. It does not happen that way with real estate closings because the pressure to close comes from so many different sources. Unfortunately, the unethical lender is usually correct in assuming you will have to close. One way to avoid the "bait and switch" scam is to lock in your interest rate and ask for the lock-in agreement in writing.