11 Tips for Avoiding Predatory Lending

Protect Yourself From Loan Fraud: 11 Tips for Smart Consumers

These tips are courtesy of HUD (the US Dept. of Housing and Urban Development). Here are 11 tips on being a smart consumer when it comes to avoiding loan fraud.

Predatory lenders take many forms and prey on people at all stages of homeownership.They cheat new homeowners by selling property for more than it’s worth using false appraisals. They coach borrowers to lie about their financial information in order to get a loan approval, and they knowingly lend borrowers more than they can afford to pay before selling the loan to a third party.

They target existing homeowners with cash-out refinance offers when the homeowners are vulnerable because of medical problems or unemployment. They also strip homeowners’ equity by getting them to refinance repeatedly even though it only benefits the predatory lender.

Finally, they show up when foreclosure is imminent and make false promises and high-pressure sales tactics to take advantage of those desperate to save their homes.

Tips for Smart Home Buying

Credit.org is committed to helping people avoid becoming victims of predatory lenders. As a HUD-Approved housing counseling agency, we are proud to be a part of HUD’s “Keep Your Home, Know Your Loan” campaign, and we offer these 11 tips for being a smart consumer, courtesy of the U.S. Department of Housing and Urban Development:

1. Before you buy a home, attend a homeownership education course offered by the U.S. Department of Housing and Urban Development (HUD)-approved, non-profit counseling agencies.
2. Interview several real estate professionals (agents), and ask for and check references before you select one to help you buy or sell a home.
3. Get information about the prices of other homes in the neighborhood. Don’t be fooled into paying too much.
4. Hire a properly qualified and licensed home inspector to carefully inspect the property before you are obligated to buy. Determine whether you or the seller is going to be responsible for paying for the repairs. If you have to pay for the repairs, determine whether or not you can afford to make them.

Mortgage Application Best Practices

• Shop Around for Lenders: Compare costs and avoid anyone steering you toward just one lender.
• Submit Accurate Loan Application Information: Ensure all information on your loan application—income, debts, employment status, and down payment source—is truthful. Lying on a mortgage application is fraud and can result in criminal penalties.
• Borrow Within Your Means: Never let anyone convince you to borrow more than you can afford to repay. Falling behind on payments could cost you your home and all the money you’ve invested in it.

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Signing Documents and Legal Protections

When signing contracts, follow these guidelines to protect yourself:

1. Never Sign Blank Documents: Blank spaces can be filled in later, potentially binding you to unfavorable terms. Cross out or write “N/A” in blanks to safeguard against this.
2. Read and Understand All Documents: Carefully review all paperwork and ask questions if you don’t understand anything. Seek legal advice from an attorney skilled in real estate law, a trusted real estate professional, or a HUD-approved housing counselor.
3. Seek Affordable Legal Help: If you can’t afford an attorney, consult a HUD-approved housing counseling agency. They can review your documents or refer you to low-cost or free legal assistance.

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Stay Informed and Vigilant

Credit.org is committed to helping people avoid falling victim to predatory lenders. As a HUD-approved housing counseling agency, we proudly participate in HUD’s “Keep Your Home, Know Your Loan” campaign.

For more personalized support, call us today for housing counseling or guidance from a HUD-approved agency. Protect yourself and your financial future with education and informed decision-making.

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