Protect Yourself From Predatory Lending

The best way to protect yourself from predatory lending is to be informed. If you ask questions, read all documents, and know your rights, you'll be better armed to identify and walk away from a bad lender. When you're informed, you can protect yourself and make sure you get the best mortgage for your needs.

You have a legal right to have - in writing - the total cost of the loan, the annual percentage rate, the monthly payments, and how long you have to pay back the loan. Always ask questions until you understand everything.

• Shop around for the loan that best meets your needs.
• Know what your credit score, income, and loan amount is and ask several lenders for the best rate they can offer. Comparison shop using the same loan rate and term so you're comparing apples to apples among lenders.
• Understand the total cost of the loan, including the monthly payments, the interest, and any other costs like property insurance.
• Make sure you know what the loan is covering in terms of fees and costs.
  Your loan can include the actual amount you're borrowing, Private Mortgage Insurance, and closing costs. Make sure your loan is not "packed" with premium credit insurance add-ons that you don't understand or want (like credit life insurance).
• Say no to easy money. If the lender says your credit problems won't affect your interest rate, be cautious. They may not be telling you the truth.
• Don't let the lender pressure you into making false statements or leaving blank spaces on your application to be filled in later. Make sure all documents are complete, truthful, and have the right dates. False statements become your responsibility and you could be breaking the law.
• If you're not sure about the loan or don't completely understand the details, don't sign the contract. Before you sign the loan papers, ask a credit or housing counselor, lawyer, or trusted friend to go over them with you. Once you sign, you are legally bound to the terms of the contract.
• Protect your home equity. If you're taking equity out of your property, only take out the minimum amount that you need. See a financial advisor or credit counselor before you tap into the equity of your home.

Resources

• Don't think you're getting a fair loan? Talk to a consumer credit counseling agency or non-profit housing counselor if you're not clear and need help finding a fair loan. Feel free to ask if the companies offering you loans have had any complaints filed against them.