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Know Your Legal Rights as a Buyer and a Borrower

If you're planning a home purchase and you've never bought a home before or owned real estate of any form, you may be unaware of the rights you have as a home buyer and a borrower.  The real estate and mortgage industries are at least partially regulated by the United State government, and multiple bills and laws have been passed to ensure that consumers in this industry are empowered and protected.

There are two primary acts that have established protections for real estate buyers and mortgage borrowers.  Basic information about these acts is outlined below, along with a list of your rights as a first time home buyer and borrower.

The Fair Housing Act

The Fair Housing Act prevents real estate sellers and mortgage lenders from unfairly discriminating when deciding who is eligible to purchase a home or receive mortgage funds.  Sellers and lenders cannot discriminate based on race, color, national origin, religion, sex, handicapped status, or familial status.  This last item is of unique importance, as it prevents sellers from only offering their homes to individuals who don't have children or who have just a few children.  This practice would likely be common if not for the Fair housing Act.

Most importantly, the Fair Housing Act prevents discrimination based on ethnicity.  This was a common problem decades ago and in earlier generations when the majority of homeowners were of one ethnicity, and anyone not of that ethnicity was often unable to receive mortgage financing due to racial stereotyping.

The Real Estate Settlement Procedures Act (RESPA)

RESPA is primarily concerned with ensuring that accurate, timely, and relevant information is provided to home buyers during the mortgage application process.  Before RESPA, unscrupulous lenders would sometimes charge high settlement fees and closing costs without making the borrowers aware of these costs until all parties reached the closing table.  RESPA requires that lenders make all costs known early in the mortgage process.  Lenders must provide a Good Faith Estimate (GFE) of all costs associated with the mortgage within just a few days of receiving the borrower's mortgage application.

Your Rights as a Buyer and a Borrower

You have the right to a Good Faith Estimate.  Your lender must provide you with a Good Faith Estimate that outlines all costs associated with your loan, regardless of whether it is a conventional loan, a VA home loan, or an FHA mortgage.  This must be provided to you within three days after your lender receives your mortgage application.

You have the right to ask questions.  If you don't understand an item listed on the Good Faith Estimate your lender provides, you are entitled to a full explanation of the item and the purpose it serves, as well as why you are being required to pay it.  Don't be afraid to ask questions.  You have the right to do so.

You have the right to know which fees are not refundable.  If you choose to cancel your mortgage application midway through the process, your lender may claim that some fees you have already paid are nonrefundable.  This is not illegal, but you have the right to know which fees are nonrefundable beforehand.  If you're considering canceling your mortgage application, make sure you ask about this.

You have the right to know how much your mortgage broker is being paid.  Your mortgage broker will receive payment from two sources.  He or she will be paid by you as part of the costs of closing the loan.  He or she will also be paid by the lender you are working with.  You have the right to know how much your broker will be paid, both by you and by the lender.

You have the right to know why your loan was denied.  If your loan is turned down for any reason, you have the right to know what that reason is.  Your lender must explain this to you.  You also have the right to receive a loan without discrimination based on race, color, national origin, religion, sex, handicapped status, or familial status.  If you suspect your lender may have denied you a loan due to one of these factors, make sure to as k what the real reason was.  If no reason is given, be suspicious.

It's important that you know your rights as a home buyer and a borrower before you step into the marketplace to buy a home.  Make sure you work with a reputable buyer's agent and mortgage broker or loan officer, and you shouldn't encounter any difficulties.

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