7 Key Signs Your Mortgage Lender Is Ripping You Off

Core Insights - The report from Tomo Mortgage highlights that predatory lending practices could cost U.S. homebuyers $11 billion in 2023 due to inflated rates, hidden fees, and misleading pricing [1] Group 1: Predatory Lending Practices - Predatory lending practices include tactics such as "point traps," where lenders advertise low interest rates but require borrowers to pay high upfront fees to access those rates [3][4] - Borrowers, especially first-time homebuyers, may focus on attractive interest rates without understanding the significant added costs associated with discount points [4] - Signs of point traps include extremely low advertised rates and vague language like "as low as," which can mask the true cost of obtaining the lowest rate [5] Group 2: Closing Fees and Transparency - Some lenders fail to disclose all closing fees upfront, leading to a lack of transparency in the total cost of the loan [5][6] - The tactic known as "sleight-of-estimates" involves underestimating certain closing costs to make the loan offer appear more attractive, distracting borrowers from higher origination charges [6] - Borrowers often realize the true costs only at the closing table, making it difficult to switch lenders without incurring additional costs [7]