A bank bait and switch first home buyer mortgage loans incident happens this way: a lender offers a teaser interest rate that entices the borrower, but later it is revealed that the advertised interest rate is not the rate actually offered to the borrower. First time homebuyers are oftentimes stunned to realize they aren't receiving the interest rate or loan product they were initially led to believe they would receive.
First Time Homebuyers
Buying a home for the first time can be a tricky event, and many people rely heavily on their lenders to explain the process to them and help them navigate through everything. When the lender is not completely forthright with the borrowers in an attempt to hook them with a mortgage loan, this can be considered bank bait and switch first home buyer mortgage loans.
First time homebuyers are eager to get the very best deal possible, but may not understand that just because a mortgage lender advertises a certain interest rate or loan term it does not necessarily mean that every approved applicant will receive those terms. In fact, many lenders eagerly advertise the very lowest interest rate they offer, yet only give this rate to very few applicants.
Unless the first time homebuyers have outstanding credit, a large amount of money in savings, and have the funds to make a substantial down payment, chances are they will wind up with an interest rate or term that is different than the one advertised. Seasoned homebuyers understand this process, but applicants new to the process may not. This is where it becomes the responsibility of the lender to make sure the borrowers understand the terms of the loan before going forward.
Some mortgage consultants have been trained by the lender they work for to not allow the applicant to delve too deeply into the facts surrounding the interest rate of the loan. This is in an attempt by the company to give a higher interest rate than anticipated by the borrowers, and in hopes that the borrower will not notice the higher interest rate until the loan has closed.
Bank bait and switch first home buyer mortgage loans do not necessarily involve outright lying to applicants, but instead involves situations where the lender is not entirely clear on the facts and perhaps even dissuades applicants from asking questions.
Terms of the Loan
If an applicant does not understand the fundamental differences between fixed rate loans, adjustable rate loans, and interest-only loans, then the applicant may simply assume that the interest rate offered initially will always be the interest rate throughout the amortization. In fact, some homeowners do not have any idea whether their mortgage loans have the potential to increase in interest rate, even long after the loan has closed and the homeowner is already making payments.
Lenders attempting to bait and switch first time homebuyers may proclaim the merits of the low interest rate, yet fail to disclose that the interest rate is subject to change after a certain period of time.
Avoid Bank Bait and Switch First Home Buyer Mortgage Loans
The very best defense against falling for a bait and switch situation when acquiring a mortgage loan is to educate yourself on the various mortgage loans available. Also, however tedious it may be, you should always take the time to read every single document your potential mortgage lender sends you. Every detail of your mortgage is described within these documents, and you may be surprised what you discover if you actually comb through the documents thoroughly.
If a potential lender attempts to dissuade you from reading the documents, or if the representative from the lender answers your questions in vague and unclear ways, it may be time to find a different lender.
Signing the mortgage loan documents is supposed to demonstrate that you fully understand the terms of the loan and you are willing to make payments as agreed. Do not sign any documents you don't understand, and don't allow yourself to fall victim to a bait and switch tactic.