Shopping: How to Tell if Your Lender is Reputable

By Francine L. Huff
Mortgage Credit Problems Columnist

If there's one thing the subprime lending mess has shown, it's that a lot of people didn't bother to check out their lender before committing themselves to buying a house. But taking on a mortgage, refinance, debt consolidation, or other large loan is a huge financial commitment. That's why it's important to ask the right questions to find out if a particular lender is reputable.

Length of Time in Business

Find out how long the mortgage or refinance company has been in business, especially if it's a bad credit lender. The potential for fraud is high when a company hasn't been in business a long time. In some cases, a bad credit lender may have changed the name of its company after getting in legal trouble, or may be simply trying to cash in on vulnerable customers. Check with the Better Business Bureau and your state attorney general's office to find out how long a company has been around.

Telling the Truth

Anytime a mortgage or refinance company asks you to lie on a loan application, run the other way. Some disreputable bad credit lenders may ask you to inflate your income on the application to qualify for a loan. But a legitimate firm wants to know your actual income and will ask for bank statements and proof of income. Also, watch out for inflated appraisals, another sign that a lender isn't reputable.       

An Individualized Plan

Avoid lenders that try to force you into a cookie-cutter loan. Not everyone is in the same financial boat, so the debt consolidation loan or mortgage that is right for someone else may not be right for you. An experienced lender will evaluate your total financial picture to find a loan you can afford. They should explain all the terms of their offer and give you all the facts in writing.

                                                                                     

Who Is Your Liaison?

It's best to choose a lender that will assign a particular loan officer to work with you through closing. Before signing up with a mortgage or refinance company, find out who will be assigned to your case and if he or she will remain your contact person. You don't want to waste time tracking down some unknown person every time you need information.

Ask friends and family which company they used for a debt consolidation loan, mortgage, or refinance. Try to get as many referrals as you can so you can compare deals.

About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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