Home Equity or Refinancing Offers that Seem too Good to be True
Do you want to consolidate your debts?
Does your home need repairs that contractors tell you can be easily financed?
If you are a homeowner in need of some money to pay your bills, perform repairs or consolidate your debts, there are some details to consider before you decide to put your home on the line when borrowing money. The costs of doing business with some mortgage lenders can be excessive. For instance, some lenders often called “predatory lenders” target homeowners who have low incomes or credit problems and deceive them about loan terms or give them loans they cannot afford to repay.
Do your homework
Be cautious of lenders who just appear at your door or call you and send you offers in the mail. If you choose to use a mortgage broker, remember to do your homework. Make sure you are clear about the interest rates and payments, the terms of the loan, points and fees. After you are clear about all the costs of your loan, then you can start negotiating with your lender. Don’t be afraid to make lenders compete for your business by letting them know you are looking for the best deal. Ask each lender to lower the points, fees, or interest rates to make sure you get loan terms and payment options that you can afford.
Make sure all promises, verbal or otherwise, are put in writing. It’s only what’s in writing that counts. Make sure you are clear about all the deal points, have a friend, relative, attorney or housing counselor review the Good Faith Estimate and other loan paperwork before you sign the loan contract.
Don’t Sign on the Dotted Line if the Lender…
Tells you to falsify information on the loan application (for example, suggests that you write down more income than you really have).
Pressures you into applying for a loan for more money than you need, or one that has monthly payments larger than you can afford.
Promises one set of terms but gives you another with no good reason for the change.
Tells you to sign blank forms or forms that aren’t completely filled in. If an item is supposed to be blank, draw a line through the space and initial it.
Pressures you to sign today. A good deal today should be available tomorrow.
Know that You Have Rights Under the Law
You Have 3 Business Days to Cancel the Loan
If you’re using your home as security for a home equity loan (or for a second mortgage loan or a line of credit), federal law gives you 3 business days after signing the loan papers to cancel the deal–for any reason–without penalty. You must cancel in writing. The lender must return any money you have paid to date.
If you have any other questions about refinancing your home loan, leave them below. We are happy to support you at whatever stage you are at in the process. To have this blog delivered right into your inbox, subscribe to the right.
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