When accepting a loan for a specific purpose, you are obligated to use it for that intended purpose. Using the loan for other reasons is actually illegal. The lender will not be happy and may even file a legal action against you. Here we will have a look into what some of the outcomes are and what you should really do if you need a loan, but truthfully.

Usually when you apply for a loan the lender will want to know how you are spending the money and they will usually put a restriction on the use of the loan. This is all done for a good reason. They need to know that their money isn’t going to be wasted. Depending on what the loan is, you will have a variety of fees and interests rates that usually go up when the loan has a high risk borrower. Borrowers who do not have collateral are considered high risk. But this does vary from lender to lender. These terms of what the loan can be used for will be stipulated in the contract you will need to sign when you are approved for the loan. If you are going to use a loan for something other than its initial purpose be aware of the repercussions. These consequences usually include things like having to give back the loan money or if you have spent it you will have to pay it back straight away as well as facing penalty charges. Fees are also applied that resulted in your breaking the agreement that was written out in the contract’s terms and conditions. The lender could even take legal action against you, such as filing a law suit and other related options, which in the end will cost you even more money. You will need to pay your lawyers fees and possibly the lenders lawyer as well, not to mention this will also take up a lot of your time.

To make matters even worse was if you applied for a loan and used it for something other than what you told the lender you were going to use it for, is found to be lying on the application form. Lying about information like your income and assets so you could increase your chances of getting the loan in the first place will only lead you into legal trouble. When you are caught doing this, you could be charged and prosecuted with several counts of fraud as well as other charges. You will also face having a criminal record as well as the possibility of receiving fines, community service, jail and the ruination of your credit record. The lender can also take other legal actions against you.

If you are in need of a loan you are much better off applying for a personal loan. These loans are available through any bank for almost any amount. With a personal loan you have the pleasure and ease of being able to do anything that you please with it. You can buy that stereo you’ve always wanted, a big screen television, a fast car, pay your over due bills, go on a fantastic holiday, move to a new house or practically anything you want, without being restricted and it is a completely legal and up front. No need to lie when applying for a personal loan. Sometimes personal loans can come with higher interest rates since there is a degree of risk involved, but you have the freedom and flexibility to shop around for such things such as lower interest rates. Personal loans usually have a lot more flexibility in their repayment options.

When you really look at it, is it worth putting your clean credit record at risk or even being denied the chance to apply for another loan in the future by lying about what you are using the loan money for? Remember there are plenty of other loan options available that you can apply for and use in absolutely any way you’d like and for anything you want. Do the right thing and tell the truth about what you are going to use your loan money for. In the end, a few extra dollars for the higher interest rate will out weigh any court matters.

6 Common Mortgage Scams

Scams are abundant in the world today and seem to be seeping into every facet of business, and mortgage loans are no exception. Most scams in the mortgage field tend to prey home buyers and owners who aren’t overly educated in the area. So here we will have a look at how some of these mortgage scams work and their outcomes so you know to be aware of them and do not fall into their trap.

Internet and Phone Scams:

These scams are usually by advertising low interest mortgage loan rates in the news paper or on the internet and even sometimes under a trusted company names. The way this works is by having people who are seeking a mortgage loan replying to an ad, either by phone or by internet forms. They then ask for your personal information like your account numbers and your social security number. These loans are instantly approved and the borrower usually goes on to faxing documents and sending wire transfer payments without ever meeting the lender in person. Usually the result of these scams is that you lose your money, have no loan and your personal information is either sold or your identity is then stolen.

Refinancing Loans Scams:

There are quite a few refinancing loan scams out there, many times these are focused toward the borrower who is in need of money. Usually you are left in greater debt and even have the possibility of losing your home. Some of these types of scams are:

Equity Stripping Scams

These scams usually arise when your mortgage lender approaches you and tries talking you into taking out a loan, because you need the money. They usually know that you can not afford the repayments but will encourage you to do so anyway, even if it means dodging up some of the loans forms so it will get approved. The reason they do this ‘encouraging’ while knowing you can not afford it, is to foreclose on your house as soon as you miss a payment.

Loan Flipping Scams

These scams are usually done after you have been paying your mortgage off for a while and the loan lender approaches you to refinance your loan, telling you that you can have a little bit of extra cash in your pocket. Once you have accepted, a few months later the lender will approach you again, this time offering another refinancing deal so you can get even more cash. This may sound good at first, but in the end you are paying more for your loan, are getting charged extra fees, points and even a prepayment penalty as well as a higher interest rate. Usually the more times you are talked into refinancing, the more you’re getting in over your head in the payments and the closer the possibility will be of losing your home.

Balloon Payment Scam

This scam is usually done when you no longer can keep up with the payments on your mortgage and you are approached by the lender with the offer of refinancing. They will tell you, if you refinance, you will pay less on your monthly repayments. Most times the reason for the lower repayments is that you are only paying the interest on the loan and after the term is up you have to pay the whole loan in one lump sum or balloon payment. This usually leads to you being unable to pay the whole loan on the due date and this leads to foreclosure and the loss of your home.

Mortgage Elimination Scams:

These scams are usually pin pointed at home owners who are having a hard time repaying their mortgage. Ads are often used in this type of scam, enticing home owners to hire this particular mortgage company and be rid of all mortgage payments. Usually what happens is that you pay out a fee to get the ball rolling on your mortgage elimination, then process a heap of fraud forms against the lender and file phony loan applications. Usually the only outcome is that you are making matters worse and even committing criminal acts, without even knowing it, as well as many other factors that come into it.

There are numerous other scams out there in the mortgage field, always be aware of who you are loaning through and your loan agreements.

The best way to prevent being a victim of a mortgage scam is by using your common sense. Apply in person at a company you know you can trust. Don’t take on more than you can chew. If you need to refinance your loan make sure that you know exactly what and how much you will be paying and how much your loan will be after all new charges have been added. Never believe in anything that seems too good to be true, because most times it probably is.

If there’s one rule that dominates in the home mortgage industry it is this: That you never go solely according to the mortgage interest rate. Instead, it makes good sense to take a close look at the jargon surrounding a mortgage program. You could even check back with lenders or a mortgage broker or shop on the Web for comparative rates. While you shop around, be armed to ask your mortgage lender a few key questions given here. The answers that you get will help you decide which loan is best for you.

How soon can I expect my mortgage loan application to take?

Typically, a loan application for a home mortgage takes about 45-60 days to come through. Of course, there have been times when they’ve taken just 30 days too! But really the time taken depends on how soon the lender can get the property appraised, a credit report and employment details and bank accounts verified.

Which documents will I have to furnish?

A certificate proving your income and assets will be necessary to get a home mortgage loan. However, lenders ask for different documents, so it depends on whom you meet.

What would qualify me for a home mortgage loan?

Your lender will look at your credit history, income, employment status, assets and debts before granting you a home mortgage loan. If you’re a first time home buyer, you stand a better chance of being granted a loan.

How much would I have to pay as a minimum down payment?

First, finalize the down payment amount on your home mortgage loan. Based on this your lender can offer you a range of interest rates, loan terms and perhaps even refuse to consider private mortgage insurance. While some loans demand a 20 percent down payment; others are lower than that.

How much mortgage interest would I have to pay annually?

To compare well against different lenders’ rates on your home mortgage loan, ask them for their annual percentage rate or APR of the mortgage interest.

How much would I have to pay by way of origination fees on the loan?

Origination fees are usually paid as prepaid mortgage interest on your entire home mortgage loan. Your lender might ask you to pay this in points at closing time just so that you get a lower interest rate on your home mortgage loan.

Can the interest rate also be locked in?

The interest rate of your home mortgage loan is variable, so it could rise or fall before you closing time. So, it would be wiser to lock in the rates for a specified time period rather than have a floating rate till closing. Ask your lender for any fee for locking in a rate and if you could lock in points.

What is meant by the “good faith estimate” of closing costs?

Mortgages, including home mortgage loans, are accompanied by a whole litany of fees. So, ask your lender to show you the whole list of estimated closing costs before you actually apply for the loan. And bear in mind that certain fees must be paid upfront, for instance the credit report, property appraisal and loan application fee.

Will I also be asked to pay a prepayment penalty on the loan?

This is a matter for mortgage home loan shoppers to consider. You would need to know the duration of the penalty period and how the fee will be calculated. While some penalties stand at one percent of the loan amount, others aren’t that simply calculated.

Can I expect any setbacks in my home mortgage loan being approved?

Everything on your home mortgage loan can go like clockwork if you provide the lender with complete and accurate information about your financial status. However, there could be a delay if the lender finds credit problems in your financial statement. To avoid such an eventuality, notify your lender on your personal or financial status if there is a sudden change after you have sent in your application. For instance, if you have changed jobs suddenly, got an increase or decrease in your salary, have had a windfall, or if you have a change in your marital status, inform your lender.

There was a time when all mortgages meant comparing the fixed interest rate mortgages of a handful of lenders. Today, however, the search for mortgages is more detailed and perhaps just a little too complicated to maneuver easily. Adding to the confusion are the many, many types of loans, loan programs of mortgage brokers, lenders, bankers, credit unions, finance companies, among others.

Considering there’s just so much to learn, finding the perfect mortgage that fits your needs is difficult: no, it doesn’t start with an application, but with a thorough knowledge of the system. True, it takes time to understand, but isn’t it better to know the subject before getting into it?

Being in this market will tell you that there’s one rule that dominates in the home mortgage industry: That you never go solely according to the mortgage interest rate. Instead, it makes good sense to take a close look at the jargon surrounding a mortgage program. You could even check back with lenders or a mortgage broker or shop on the Web for comparative rates. Ask your mortgage lender a few key questions given here that will help you decide the kind of loan that suits you. You can also get information from web sites, newspapers, mortgage books and consumer seminars.

How soon can I expect my mortgage loan application to take?

Typically, a loan application for a home mortgage takes about 45-60 days to come through. Of course, there have been times when they’ve taken just 30 days too! But really the time taken depends on how soon the lender can get the property appraised, a credit report and employment details and bank accounts verified.

Which documents will I have to furnish?

A certificate proving your income and assets will be necessary to get a home mortgage loan. However, lenders ask for different documents, so it depends on whom you meet.

What would qualify me for a home mortgage loan?

Your lender will look at your credit history, income, employment status, assets and debts before granting you a home mortgage loan. If you’re a first time home buyer, you stand a better chance of being granted a loan.

How much would I have to pay as a minimum down payment?

First, finalize the down payment amount on your home mortgage loan. Based on this your lender can offer you a range of interest rates, loan terms and perhaps even refuse to consider private mortgage insurance. While some loans demand a 20 percent down payment; others are lower than that.

How much mortgage interest would I have to pay annually?

To compare well against different lenders’ rates on your home mortgage loan, ask them for their annual percentage rate or APR of the mortgage interest.

How much would I have to pay by way of origination fees on the loan?

Origination fees are usually paid as prepaid mortgage interest on your entire home mortgage loan. Your lender might ask you to pay this in points at closing time just so that you get a lower interest rate on your home mortgage loan.

Can the interest rate also be locked in?

The interest rate of your home mortgage loan is variable, so it would be wiser for you to lock in the rates for a specified time period rather than have a floating rate till closing. Ask your lender for any fee for locking in a rate and if you could lock in points.

What is meant by the “good faith estimate” of closing costs?

Mortgages, including home mortgage loans, are accompanied by a whole litany of fees. So, ask your lender to show you the whole list of estimated closing costs before you actually apply for the loan. And bear in mind that certain fees must be paid upfront, for instance the credit report, property appraisal and loan application fee.

Will I also be asked to pay a prepayment penalty on the loan?

This is a matter for mortgage home loan shoppers to consider. You would need to know the duration of the penalty period and how the fee will be calculated. While some penalties stand at one percent of the loan amount, others aren’t that simply calculated.

APR, FICO and HELOC are terms that are used for interest and loans within different areas of living. While each has certain rules and regulations, they all are important ideals to pay attention to with credit, loans or interest.

APR stands for the Annual Percentage Rate. It includes the yearly cost of a loan calculated in a fee as a percentage. It will include interest and insurance in the calculation of costs. The APR is most likely to be included in mortgages, credit cards and car financing. By knowing what the APR is of a certain loan or credit card that you are about to get, you will be able to see the best loan or finance to invest in.

For credit cards, there are a couple of different types of APRs. The first is for purchases. These APRs should generally be lower than any other type of rate that you would receive. The second type of APR in credit cards is for cash advances. If you have to take a loan out of your credit card, or go over your limit, the APR will automatically increase. Balance transfers are the third type of APR that will affect your credit. By making a balance transfer from one credit card to another, your APR will also increase. There are also tiered APRs where different rates will apply to certain levels of outstanding balance that you may have on any type of credit or loan. A penalty APR may also apply. If the credit card or loan is paid late one or more times within a given amount of time, the APR will also include a penalty rate.

If you already have an APR, you can always try to get it lowered. There are several ways to do this. If you are looking at an APR for a mortgage, you can negotiate the closing costs and keep your mortgage for a longer period of time. This will automatically drop the APR to fit with the time period and annual rate which you must pay.

FICO is an acronym for Fair Isaac Credit Organization. The Fair Isaac Corporation is a company that provides several financial services of several different kinds. This includes mortgages, insurance and healthcare. One of their branches is FICO. Through this company, you can be given your credit scoring and advice on how to have good credit. If you are applying for a new loan or credit card, lenders will most often go to FICO to find the score of your credit.

There are three parts to this score, including your interest rate, your monthly payment, and a number which is your FICO score. The higher your number is, the less you will have to pay on your loans or credit cards for interest rates and monthly payments. These estimates are based on how many credit cards you have, the history of your loans and credit cards and the balance on these different types of credit cards or loans. By estimating your score, you will know how much you will have to pay in a new loan or how much will be available for a new credit card which you are applying to.

HELOC is an abbreviation for home equity line of credit. HELOC is mainly used for taking out a mortgage or a loan for your home. By using this type of credit, you will be able to have a larger amount of credit available with a lower interest rate. This type of credit line is usually based around a variable interest rate, as opposed to a fixed rate. This means that the interest rate will change according to the public margin. Because of this, it is advised that you look into the index and margin that each lender uses so that you can have the best fixed rate. There is also a cap, or fixed amount with the variable rate plan, allowing the interest rate to only go a minimum or maximum amount.

The first step into getting a home equity line of credit is to be approved for a certain amount that is given by a credit company. This is usually taken on a percentage that is appraised from the value of your home. Your ability to repay the loan will then be looked at. Things such as your income, debts and credit history are looked into to see how much you can qualify for. Once approved for a certain amount, you are then able to draw from these funds as you would a bank account. Depending on the type of credit line you have, there may be limitations on how much you can draw from at one time. If you decide to sell your home, you will most likely be required to pay back the home equity line in full.

No matter which type of credit or loan aspect you are looking into, knowing what they mean and what applies to each area will help to lower your costs.