Warning signs of predatory lending practices
- Falsifying information – Providing inaccurate information on a mortgage application about income, debt, employment history, intent to occupy the premises, or the value of the home is fraud and is subject to criminal penalties.
- Second set of documents – Never sign an addendum or second set of documents that won’t be shared with all parties. This could be a warning sign that fraud is being committed.
- Bait and switch – Make sure the terms on the mortgage are the terms you agreed to before closing. Do not sign loan documents without reading them and do not be pressured into signing “new deals” at closing.
- Documents containing blanks – If information is added after you have signed a document, you may still be responsible. Cross out any blanks or insert “N/A” (“not applicable”).
- Multiple refinancing – Be careful of refinancing repeatedly after short periods of time. Each refinancing often comes with new fees and possibly prepayment penalties. While these loans may offer lower interest rates and payments, you may be losing your equity or have more debt because refinancing and origination fees are added to the loan.
- Borrowing too much – Don’t let anyone convince you to borrow more money than you need or more money than you can afford to repay.
- Excessive fees – While it is not uncommon for lenders to charge fees for appraisals and credit reports, you should beware of loans with large, non-refundable application fees. Loan costs can be compared by looking at the Good Faith Estimate (GFE) form that all lenders are required to provide to a borrower at time of application. Beware of lenders that don’t offer you a GFE to compare costs before you apply for a loan.