Solutions Home Buyers Can Use to Avoid Predatory Lenders
We’ve presented many great resources to educate and help you navigate the lending industry. But we can’t emphasize enough how vital personal connections and business relationships are, especially when there is a great deal of money at stake. You can read every website and brochure offered here, but your most important resource remains your Realtor®. (Your Bella Casa Realtor®, or course!) As self-serving as that may sound, we know from eons of experience how our service and network of credible contacts has saved transactions, saved home buyers money, and prevented awful situations of predatory lending from taking place. Meet your greatest real estate resource here.• Check out lenders with the Better Business Bureau, government websites, 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?
• Refuse to participate in transactions that may be fraudulent.
• Share predatory lending “horror” stories with regulators, other consumers, REALTORS®, counseling groups, housing professionals, and the media.
• Make contracts subject to the homebuyer receiving approval from a lender for a fair and affordable loan.
• Avoid unnecessary contract extensions that could cause the lender’s loan commitment to lapse.
• Get educated on the value of your home by asking your REALTOR® for a comparative market analysis.
• Review the HUD-1 closing statement before closing. Upon request, home buyers have the right to see this information 24 hours before the loan closing.
• Report possible violations to appropriate federal, state and local officials.
SHOP FOR THE LOWEST-COST LOAN
REALTORS® develop relationships of trust with the families they serve, and can help you avoid predatory loans by encouraging careful shopping. Ask these important questions:
• 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 will I need each month for taxes and insurance?
• Is there an application fee? If so, what is it, and 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?
Resources
Fannie Mae: “For Home Buyers & Homeowners” at www.FannieMae.com.
Freddie Mac: “Buying and Owning a Home” at www.FreddieMac.com.
Ginnie Mae: For a simple calculator to help homebuyers estimate how much they can afford to spend, read “How Much Home Can You Afford?” at www.GinnieMae.gov.
HUD Housing Counselors:
List of counseling agencies, by state, approved by the Department of Housing and Urban Development
Credit-reporting agencies:
• Equifax 800.685.1111 www.equifax.com
• Experian 888.397.3742 www.experian.com
• TransUnion 800.916.8800 www.transunion.com.
Go to www.annualcreditreport.com to ask for a free copy of your credit report, once a year, or call 877.322.8228. See also, www.FTC.gov.
Looking for the Best Mortgage is a brochure on how to shop, compare, and negotiate the best deal on a home loan. The brochure is a joint effort of 11 federal agencies, including the Federal Trade Commission (FTC), the Federal Reserve Board, HUD, and the Department of Justice.
Consumer Handbook on Adjustable Rate Mortgages (the CHARM booklet) issued by the Federal Reserve Board (FRB) and the Office of Thrift Supervision (OTS).
Home Mortgages: Understanding the Process and Your Right to Fair Lending