How to avoid predatory lenders for home equity loans

Tips to Avoid Home Equity Lending Fraud

• Don’t give out personal information or agree to a loan over the phone or via the Internet.
• Don’t let anyone who may be working on your home, like a contractor, steer you to a particular lender.
• Don’t borrow more than you can afford. Educate yourself. Know what the prevailing interest rates are. Remember that a low monthly payment isn't always a deal. Look at the TOTAL cost of the loan.
• Learn the real value of your home by getting an independent appraisal.
• Don't trust ads promising "No Credit? No Problem!" If it sounds too good to be true, it probably is.
• Get your credit report and your credit score. See if you qualify for better rates than are being offered.
• Never lie about your income, expenses or available cash to get a loan and avoid any broker or lender that encourages you to do so.
• Avoid early repayment penalties and fees of more than 3% of the loan amount (4% for FHA or VA loans).
• Be aware that credit insurance premiums (insurance that a borrower pays a lender) should never be financed into the loan up-front in a lump-sum payment.
• Don’t ever sign a document that has blank spaces or pages in it that the lender promises to fill out later.
• Ignore high-pressure sales tactics. Take your time and read everything thoroughly.
• Be wary of a lender that promises to refinance the loan to a better rate in the future. A predatory lender will let you keep refinancing a bad loan and will charge fees every time.
• Know that even if you have already signed the agreement you have three days to cancel it.

To get help, take your documents to a housing counselor near you and have them review the documents or refer you to someone who will. To find a counselor near you, visit the Department of Housing & Urban Development online or call (800) 569-4287.