banner2 Predatory Lending - How to Avoid It

 

 


Predatory lending is an increasing problem

A few simple tips will help you avoid becoming a victim of predatory lending

The news has been full of stories recently about the increase in predatory lending in the real estate industry. Recent studies have shown that minorities are much more likely than whites to receive unfavorable loans and terms. Sometimes, these loans carry expensive fees, other times they just have high interest rates. Sometimes, the loans have obscure terms that make it clear that the lender really wants to foreclose on the property, rather than lend money.

All of these things can be avoided if you just take your time and exercise a little caution. Here are a few tips on how you can avoid being a victim of predatory lending.

  • Hire an attorney. For most people, buying a home is the single most expensive and complicated legal transaction they will ever conduct. It’s worth spending a few hundred dollars to hire an experienced real estate attorney to go over the contract carefully in order to make sure there is nothing suspicious buried in the document. If you’re going to spend several hundred thousand dollars on a house, it’s worth protecting with a few hundred dollars for legal advice.
  • Get other advice. The department of Housing and Urban development can help you. 
  • Make sure your credit report is accurate . The better your credit, the lower the interest rate you can get on your loan. 
  • Shop around for the best loan deal. Loan terms can vary from lender to lender and even from day to day. It pays to do your homework to find which lender can offer you the best deal. Take your time; this can save you thousands of dollars over the life of the loan.
  • Don’t deal with lenders that contact you out of the blue. You should be suspicious of lenders that call you, knock on your door or put flyers in your mailbox. If you talk to a lender that tells you his offer is good “today only”, run away! Any legitimate offer will be available tomorrow or next week, too.
  • Read all documentation thoroughly, so you know what you’re getting into, and do it before you sign the documents. If in doubt, consult with an attorney. As we mentioned above, the money spent on a good real estate attorney may be money well spent.
  • Make sure that all terms offered to you by the lender are offered in writing. A verbal agreement is meaningless. Ask upfront for a list of fees, particularly those that will be due at closing. Unscrupulous lenders often tack on unannounced fees at closing, knowing that pressured buyers will agree to pay them.
  • You have three days to cancel with many real estate contracts, including home equity loans and mortgage refinancing. Get a good night’s sleep, think it over, and cancel if you must.

    • Don’t be pressured into accepting a deal that you don’t like. Take your time, do your homework, and find honest, reputable people to deal with. You’ll do much better in the long run.
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