Enter the complicated world of brokery


Read Before you Sign!

Too many investors go to closing andfor a fixed-rate loan, you may end up
sign documents without ever readingwith a surprise at closing in the form
them, taking the word of theof an adjustable-rate loan that is fixed
"professionals" involved in the closing.only for a certain time period, such as
This is a huge mistake, unless thattwo years. In some cases, you may be
professional is your lawyer, and he orpromised a five-year fixed rate and end
she has read and understood the loanup with a three-year fixed rate.
documents. Don't presume that the lawyerMoreover, read carefully about how the
you are paying represents you.loan adjusts. Some ARM loans can only be
Too many investors go to closing andadjusted twice a year, others can be
sign documents without ever readingadjusted monthly.
them, taking the word of theFinally, look at the amount the loan can
"professionals" involved in the closing.adjust each time, and the maximum rate
This is a huge mistake, unless thatthe lender can charge over the life of
professional is your lawyer, and he orthe loan. All of this will be spelled
she has read and understood the loanout in the mortgage note. (Hint: if the
documents. Don't presume that the lawyernote is titled, "Adjustable Rate Loan,"
you are paying represents you. Manyit's a dead giveaway that you don't have
banks have lawyers that represent thema fixed-rate loan!)
and charge that fee to the borrower.Owner-Occupied Loan-If you apply for the
Mortgage brokers and lenders are not byloan as investor, the mortgage broker
their nature dishonest but there aremay submit it for approval as an
enough shady characters that try to slipowner-occupied loan, either by accident
things by on borrowers. In some cases,or on purpose. Read the documents
it is a mistake by the lender or acarefully. Do not sign your name to any
miscommunication between the mortgagedocument saying that you promise to live
broker and the lender, both of whichin the property if you aren't actually
result in the borrower getting agoing to do so. In most cases, the
different loan than what was promised.mortgage or deed of trust will have a
The most common things that arerider (addendum) that says you do not
incorrect on a loan are:intend to occupy the property as your
Prepayment Penalty-The most commonprincipal residence.
"hidden" clause is a prepayment penaltyThe bottom line my friends, is READ
that the lender does not disclose orbefore you sign. Once you sign, you are
that was supposed to be omitted. Theout of luck, because there's no
only way to know for sure is to readthree-day right of rescission for an
your mortgage note to see if there is ainvestor loan!
prepayment penalty clause. In someJump to the top of this page
cases, a lender may say there is noClick Here for more info for Read Before
prepayment penalty, but has inserted aYou Sign!
"soft" prepayment penalty (applies to .Written exclusively for by Attorney
In addition, read carefully how much theWilliam Bronchick, Certified Registered
penalty is, and how long after the loanNationally-known attorney, Author,
is originated the penalty applies.Entrepreneur and Speaker.
Fixed versus Adjustable Rate-If you pay



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