Despite efforts to crack down on risky lending practices, sketchy housing deals are making a comeback.
(Source: MSN Real Estate)
In the throes of the subprime meltdown, most mortgage lenders tightened lending standards, requiring borrowers to have credit scores of at least 700 and down payments often of 10% or more. But as the credit crunch takes a toll on consumers’ credit scores and cash positions, questionable lending practices are beginning to pop up again.
“Since early this year … a new wave of people are finding ways to scam (homebuyers),” says Dani Babb, dean of business at Andrew Jackson University, an online university based in Birmingham, Ala., and founder of The Babb Group, which offers real-estate consulting to consumers.
Combine such risky deals as 100% financing and piggyback loans with skyrocketing interest rates and fees and it could spell disaster — both for borrowers’ bottom lines and the economy, says Chip Cummings, president of Northwind Financial, a Grand Rapids, Mich.-based training and consulting firm for mortgage and realty firms.
Here are five risky financing offers that prospective homebuyers should watch out for:
1. Hard money lending
2. Advances on the First-Time Homebuyer Tax Credit
3. Zero-down financing
4. Unlicensed lenders failing to properly disclose their identity
5. Trying to buy a home that recently changed hands
Read Anna Maria Andrioti’s full article, including descriptions of the above 5 points, “5 risky real-estate deals” in MSN Real Estate.