5. Predatory lenders often structure loans with balloon payments at the end. The monthly payment seems manageable, but in a few years' time you could owe tens of thousands of dollars all at once. Of course, the broker is hoping you won't be able to afford the balloon payment and you'll refinance again, generating more fees for the firm.
6. If you see " credit life insurance" as a line item in your loan, beware! This kind of insurance is supposed to pay off your loans if you die. It's a rip-off. A basic life insurance policy is all you need. Plus, predatory lenders charge exorbitant premiums for products like credit life, credit disability and involuntary unemployment insurance.
7. Same goes for homeowner's insurance. Predatory lenders have been known to add expensive homeowner's insurance to a loan even though the homeowner already has insurance through an outside company.
8. Some predatory lenders continue to abuse you after you've gotten your loan by tacking on expenses to your monthly payments. They may charge for providing an escrow account for your property taxes, even though you are paying them directly yourself. They may charge late fees even when your payments are on time. If you try to refinance with another lender they may refuse to provide you with an accurate payoff statement.
1. Be the hunter, not the hunted. Don't borrow money from a company that slips a flier under your door or blares at you in a TV commercial. Find your own mortgage company. Check with the company that currently holds your mortgage if you want to refinance. Go to the bank where you have your checking account. Ask friends and neighbors if they've had a good experience.
2. Once you narrow down your list, check out the mortgage brokers or lenders by contacting the BBB and your county and state consumer protection agencies.
3. When a mortgage broker or lender gives you an estimate, get it in writing and make sure you have your own copy.
4. Never sign any paperwork that contains blanks.
5. Never follow advice to stop paying on your old mortgage loan. This could affect your credit record and trap you into accepting a predatory loan.
6. Demand a copy of your closing paperwork a couple days before the closing. Review it to see if the terms are different from what you were initially offered.
7. When you refinance with a different lender, you have the right to back out of the loan within three days of your closing. If you detect problems at your closing, immediately ask a real estate attorney for an opinion, so you can take advantage of that window.
If yours is an FHA loan, complain to HUD, the Department of Housing and Urban Development. If you've got a veteran's loan, complain to the VA. Contact your county and state consumer protection offices too. If they can't help you, they'll give you a referral. Your city or county office of fair housing may also be able to help. Also complain to the BBB so other consumers will have a paper trail to follow.