Monday, September 15, 2008

Avoiding Predatory Lending

Predatory lending is especially prevalent among first-time homebuyers and consumers unfamiliar with home financing. How can you avoid the pitfalls of predatory lending as a prospective homebuyer?
According to the National Association of Realtors® (NAR), homebuyers need to ask the right questions when shopping for the least expensive loan. These questions may include:

What is my credit score? Can I have a copy of my credit report?

What is the best interest rate today? Do I qualify?

Is the loan's interest rate fixed or adjustable?

What is the term (length) of the loan?

What are the total loan fees?

What is the total monthly payment? Does this include property taxes and insurance? If not, how much more will I need to pay for taxes and insurance?

Is there an application fee? How much is refundable if I don't qualify?

Are there any prepayment penalties? If so, what are they and how long do they last?
It's important to understand all the details of your loan before signing anything, so ask questions! Also, the NAR offers these other strategies that homebuyers can follow to protect themselves from predatory lending:

Check out lenders with the Better Business Bureau®, government Web sites or other consumer groups. How long has the lender been in business? Have consumers filed many complaints? Does the lender belong to a trade association with ethics requirements for its members?

Ask for an estimate and compare with other lenders.

Refuse to participate in transactions that may be fraudulent.

Avoid unnecessary contract extensions that could cause your loan commitment to lapse.

Get educated on the value of your home by asking your Real Living agent for a comparative market analysis.

Review the HUD-1 closing settlement statement before closing. This statement itemizes all charges imposed upon a borrower and seller for a real estate transaction. Upon request, homebuyers have the right to see this information 24 hours before the loan closing.

Report possible violations to appropriate federal, state and local officials.
If you're considering a home purchase and want to make sure you'll be safe from predatory lending, working with a Real Living agent is a wise move. Contact me for more information.

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