Home equity loan applicants should research their lender carefully

Mortgage and home equity lenders aren’t all honest; read the paperwork!

Record increases in real estate prices throughout the United States have inspired Americans to tap into their home equity as never before. In 2004, lenders issued a whopping $431 billion in home equity loans, and that amount is sure to increase in 2005. Everyone has different reasons for borrowing against their home; some do it to consolidate debt, others do it for home improvement, some are using the money to buy other real estate and some are using the money in the form of reverse mortgages

to fund a nice retirement. Borrowers need to be aware, however, that with the increase in lending comes an increase in predatory lenders who are interested in stealing the value of your home!

It goes without saying that most people in the lending profession are honest and most transactions will conclude safely. Recently, however, a number of lenders have entered the market who are advertising aggressively, offering terms that sound too good to be true and are far more favorable than those offered by the national banks and mortgage companies. Often, when something sounds too good to be true, it is too good to be true.

Here are a few things to look out for when taking out a home loan:

A lender offers a great interest rate, but when it comes time to sign the documents, a different, higher rate is listed on the paperwork. The borrowers, who have been promised a lower rate all along, are suddenly pressured to sign the documents and accept the new interest rate.

The loan paperwork suddenly lists previously unmentioned fees. Again, by waiting until closing to disclose these fees, the lender is hoping to pressure the borrower into signing and accepting them.

An application form that contains blanks. It’s difficult to believe that a lender would actually provide an incomplete form to a homeowner at closing, but it has been known to happen. The lender simply says, “We’ll fill it in later”, and some people actually do it! Don’t sign any document that is not completely filled out. Remember, your signature on a document makes it binding, whether the form was complete when you signed it or not.

A few simple, precautionary steps can help you avoid all of these problems and a host of others. Inquire ahead of time about the promised interest rates. Check on your lender if you are not familiar with them. Check with the Better Business Bureau or your local chamber of commerce to see if any complaints have been filed against them. Inform your lender that you will not sign any documents that contain different figures than the ones you have discussed. Be sure that you have provided full and honest information to the lender, especially where it involves your income and debt. Do not sign any blank documents. These things may seem obvious, but many people get excited at closing time and are eager to “get it out of the way.” Do not agree to any terms with which you are not comfortable. A home loan is not something to take lightly, and you can easily lose your home if you sign the wrong document. Take your time and know what you are signing.