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Navigating Your Mortgage: Managing Your Loan

Buying your dream home is thrilling, but the mortgages can be a bit daunting. Lately, many people are exploring options beyond traditional banks, turning to online-based nonbank lenders. However, a recent study by Bloomberg, “Borrowers Turned to Nonbank Lenders for Mortgages — And It’s Costing Them”, uncovered a catch: borrowers, especially those with fewer financial resources, might end up paying more in fees when working with nonbank lenders.

The Rise of Nonbank Lenders

In recent years, there has been a surge in nonbank lenders. These online-based lenders operate a bit differently; they don’t deal with deposits and often work with fewer federal rules. They depend on fees, and their partnerships with service providers, like mortgage brokers, might hike up costs for borrowers.

Over 38 million mortgages revealed that, on average, people dealing with nonbank lenders paid about $300 more in upfront fees than those with traditional banks. However, there’s a gap in fees when it comes to race and ethnicity, with Latino and Black borrowers shelling out even more. This gap is more noticeable in areas with larger Latino or Black populations.

Why the Extra Fees?

Nonbank lenders argue that they assist those facing tricky situations to secure financing. However, Bloomberg’s findings suggest that even borrowers in similar situations end up with higher fees when choosing nonbank lenders. It points to a two-tiered system where those with fewer resources end up paying more for the same services.

Impact on Homebuyers

While the extra fees might seem like a small change individually, they add up quickly. Over the last five years, nonbank lenders have been behind about 60% of all US home loans, raking in $71 billion in fees. Unfortunately, these extra costs fall more heavily on those with fewer resources

Tips for Future Homebuyers

If you’re thinking about a mortgage, keep an eye out for potential fee disparities. Nonbank lenders might offer various loan types, but those loans often come with a number of fees that can quickly pile up. Future homeowners, especially those not closely tied to traditional banks, should shop around, compare offers, and be cautious about potential conflicts of interest between realtors and mortgage brokers.

Getting a mortgage is a significant step towards owning a home, but it’s essential to navigate the process carefully. As the world of lenders changes, knowing the ins and outs of potential fee disparities empowers you to make savvy decisions. Rockland Housing Action Coalition provides housing counseling, guiding you through this complex process and ensuring a fair and transparent mortgage experience. Contact a housing counselor today!

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