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Avoid Predatory Lenders

May 27, 2008  |  Difficulty: Easy

Predatory lenders are just that, predators. They want to make you and your family their financial prey, leaving you with little equity and no financial stability.

To avoid predatory lenders, you must know their tactics. The Department of Housing and Urban Development (HUD) gives this list of things you should know to protect you and your family.
  1. You should attend courses about homeownership. HUD certified, non-profit agencies offer these courses.
  2. Find a reputable real estate agent. Interview several agents to find the right fit. Ask for references and check them out. 
  3. Check local papers and listings that show the average prices of the home in your targeted area. If you know the average price of a home in a desired area, you can avoid paying too much. 
  4. Get a property inspector. Why buy this large investment without calculating the potential risks. You must know the condition of a home before you buy. If there are needed repairs, you should renegotiate the asking price to take into account this future expense. Or, if you are not willing to pay for these repairs, request that the current homeowner to do so before you buy. 
  5. Find the best lender. Don’t commit to the first lender you speak to; shop around. Competitors may be able to give you a better deal. If you feel pressured to commit to one lender, it is likely that this lender is not for you. 
  6. Be upfront when filling out your loan application. Lying about your income, employment, debt and down payment information will not help you at all. It is actually a form of fraud, and can provoke a lender to blackmail you. 
  7. Don’t take more than what you can pay for. If you take an excess amount it is quite likely that you will lose your home and the equity stored in it. To help you be a successful homeowner, take a loan that is reasonable and manageable. 
  8. Know what you are signing. It may be surprising, but some predatory lenders convince individuals to sign a blank document! Also, if you sign a document that has blank sections, information can be added later, and you can still be bound within the contract. If you find open blanks on the document write “N/A” with this field, or simply strike a line through it. This shows that it is an intentional blank, and not a fraud tactic. 
  9. Take the time to read everything, even the fine print. It is too risky to sign a document that you do not understand. Have a real estate lawyer review your documents before you sign. If you don’t have a lawyer, a real estate professional can help you. HUD provides housing counselors through approved agencies. These sources can spot unnecessary fees and charges that a predatory lender might try to slip in. 
  10. If something does not sound right, be suspicious. For example, if the cost for home renovation becomes pricier if you do not accept company-financing options, then something is wrong. 
  11. Make sure that you are honest with your business practices. Be honest about your intentions. If you are known to falsify information, reputable companies will not want to deal with you.
Have your already been victimized? Well, since 1999, HUD has been fighting against predators that breed on the housing market. Go to their website for find out more information about what you can do if you have experienced fraud.

HUD is a national organization, but there are local organizations that work through HUD. These local agencies are set up to help you if you have victimized. To see if an agency is located in your area, you can visit the HUD website, or your local state government website.

Housing counseling agencies can help you, too, especially if your lender is threatening you with foreclosure and other penalties.

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