Cuyahoga County Educates to Fight Foreclosures

Consumer Tips For Avoiding Borrowing Pitfalls
Source: Freddie Mac

1. Shop around. Borrowers should talk to several lenders to find the best loan
for which they qualify. A loan product or lending practice may not seem
predatory until compared with a similar loan product offered by other lenders.

2. Understand the loan terms. Borrowers should compare loan terms from
different lenders. Understand the best loan terms available in the marketplace
and compare the APR (annual percentage rate) of loans from different
lenders. The APR takes into account both the interest rate and the points
and fees of the loan. A nonprofit housing counselor or a lawyer can review
the information with a borrower

3. Find out about prepayment penalties. Borrowers should know if the loan
offered to them has a prepayment penalty. Prepayment penalty should be a
choice, not a requirement.

4. Make sure documents are correct and complete. Be cautious of someone
who offers to falsify a borrower's income information to qualify for a loan.
Borrowers should never falsify information or sign documents that they know
to be false. A borrower should not sign documents that have incorrect dates
or blank fields. Be wary of promises that a lender will "fix it later" or "fill it in
later."

5. Ask about additional fees. Borrowers should question any items they didn't
ask for. Borrowers should also beware if they are told that single premium
credit insurance is required get a loan, or that purchasing it will help loan
approval. Review every fee and compare different lenders' fees to ensure the
most competitive loan terms.

6. Understand the total package. Ask for written estimates that include all
points and fees. The situation may not seem abusive until when everyone
gets to the closing table. If any fees or charges differ from what was
previously disclosed, delay the closing until all terms of the loan are clearly
understood.

7. Work with credit counselors. A borrower should get all the facts before
deciding to combine credit card or other debts into a home loan. Beware of
scam credit counseling/ credit consolidation agencies  unfortunately, not all
credit counseling agencies are acting in your best interests. Talk to a
community based consumer credit counseling agency or housing counselor
before signing the loan documents.

8. Protect home equity. If borrowers are taking equity out of their property,
they should take out the minimum amount needed. The equity in a home is a
source of wealth, which builds up slowly over time.

9. If you're not sure, don't sign! Get advice first! Talk to a community based
consumer credit counseling agency or housing counselor.

10. If you cannot pay your mortgage, call your mortgage company now. As
soon as you realize that you are unable to make your payments, talk about
your circumstances with the mortgage company to which you send your
monthly mortgage payment. Your options to retain your home are most
effective when you are only one or two payments behind.