Chris Gmyr

In tough economic times like we’re going through now, some potential homebuyers are looking to capitalize on the depressed housing market.  In general, that’s not a bad idea.  But if Fannie/Freddie or FHA/VA loans aren’t an option, be very careful about radio, TV, or online ads that brag about easy-term loans that anyone can qualify for.  Sure, you might be able to get the money you need to buy a $200,000 house today for $115,000.  But here are some ways this “amazing” deal might come back to haunt you.

1. Late fees and penalties.  The fine print usually hides outrageous fees and penalties.  Carefully read through any documents before signing anything.  If you don’t understand them, consult a real estate agent or lawyer for advice.
2. Immediate collection.  If you miss a payment, they’ll come after you with a legal team.  It’s hard to believe, but they want to foreclose on you.  Don’t give them a single legal reason to do so.
3. Very low loan-to-value ratio.  A 60% (or less) loan-to-value ratio will get easy-term lenders excited.  Why?  Because if your property value is worth far more than the money they loaned you, they’ll come out big-time if they foreclose.

So who actually uses these easy-term lenders?  Typically it’s one of four types of people: poor, uneducated people; overconfident, overenthusiastic real estate speculators; truly desperate people; and first-time homebuyers who are just learning the real estate ropes.

If the deal seems too good to be true, it probably is.  And stick to traditional lenders.  Banks.  Credit unions.  Reputable loan companies.