There is nothing more frustrating than spending weeks looking for the right home construction loan, only to have the wonderful interest rate changed after turning in your application. It is certainly not what they told you over the phone after responding to their advertisement. Believe it or not, it can happen. This tactic is known as bait and switch, also called predatory lending. Now that you know what it is, how do you avoid it?
The first way to avoid this type of unprofessional behavior is to get it in writing before signing anything. Do not fill out an application. Do not agree over the phone. Do ask for it to be put in writing and have it mailed to you.
If you are at your mortgage company to fill out forms, read everything slowly. Make sure that what you are about to sign matches what you agreed on.
What happens when everything is what they approved you for, but you are paying more than you realized? For example, they approve you for no loan fees but your interest rate is higher. This is still bait and switch. They simply hiked up the interest rate to recoup the fees.
To avoid this pitfall, make sure the interest rate they quoted to you is still the one on the contract before signing the construction loan. If there are changes, ask why. Never leave with doubts. You will pay for it later.
Not all lenders are unscrupulous. The majority of companies want your business and will provide the best construction loan for you. The best way to avoid the bait and switch trap is by not signing anything until you are sure it is exactly what you want.