Identifying Predatory Lenders

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Identifying Predatory Lenders


Overview:

Predatory lending refers to exploitative practices by certain lenders in the mortgage industry. These lenders often strip borrowers of their home equity and put them at risk of foreclosure. Fortunately, there are clear warning signs that can help you avoid falling victim to these harmful tactics. Here’s what to watch for:

1. Honesty is Key: Avoid lenders who encourage dishonesty on your loan application.

2. Complete Disclosures: Ensure you receive all necessary documents, including the Good Faith Estimate, Special Info Booklet, Truth in Lending, and HUD-1 Settlement statements.

3. Avoid Blank Signatures: Never sign blank documents. Double-check everything for unauthorized changes.

4. Be Cautious with Refinancing: If a lender pushes you to refinance repeatedly, increasing your payments each time, seek a different lender immediately.

5. Read the Fine Print: If daily interest is charged for late payments, this could indicate predatory lending.

6. Loan Value Concerns: Be alert if your loan exceeds your home's value.

7. Unexpected Costs: Watch out for undisclosed settlement costs.

8. Unanticipated Payments: If your payments exceed what was disclosed, you might be dealing with a deceitful lender.

9. Beware of Balloon Payments: A requirement to finance a balloon payment with the same lender can be a red flag.

10. Insurance Pressures: You are not obliged to purchase credit insurance. Avoid lenders who heavily pressure you to do so.

Why It Matters:

Buying a home is a major investment and choosing the right lender is crucial. Your credit score, finances, and borrowing ability are on the line. Protect yourself by identifying and steering clear of lenders who aim to exploit your trust and resources.

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