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Are you in need of cash?
Do you want to consolidate your debts?
Are you receiving home equity loan or refinancing offers that seem too good to be true?
Does your home need repairs that contractors tell you can be easily financed?
If you are a homeowner who needs money to pay bills or for home repairs, you may think a home equity loan is the answer. But not all loans and lenders are the same--you should shop around. The cost of doing business with high-cost lenders can be excessive and, sometimes, downright abusive. For example, certain lenders--often called "predatory lenders"--target homeowners who have low incomes or credit problems or who are elderly by deceiving them about loan terms or giving them loans they cannot afford to repay. Borrowing from an unscrupulous lender, especially one who offers you a high-cost loan using your home as security, is risky business. You could lose your home and your money. Before you sign on the line, |
Think about Your OptionsIf youre having money problems, consider these options before you put your home on the loan line.
If you decide a loan is right for you, talk with several lenders, including at least one bank, savings and loan, or credit union in your community. Their loans may cost less than loans from finance companies. And dont assume that if youre on a fixed income or have credit problems, you wont qualify for a loan from a bank, savings and loan, or credit union--they may have the loan you want! Do Your HomeworkContact several lenders--and be very careful about dealing with a lender who just appears at your door, calls you, or sends you mail. Ask friends and family for recommendations of lenders. Talk with banks, savings and loans, credit unions, and other lenders. If you choose to use a mortgage broker, remember they arrange loans but most do not lend directly. Compare their offers with those of other direct lenders. Be wary of home repair contractors that offer to arrange financing. You should still talk with other lenders to make sure you get the best deal. You may want to have the loan proceeds sent directly to you, not the contractor. Comparison shop. Comparing loan plans can help you get a better deal. Whether you begin your shopping by reading ads in your local newspapers, searching on the Internet, or looking in the phone book, ask lenders to explain the best loan plans they have for you. Beware of loan terms and conditions that may mean higher costs for you. Get answers to these questions and use the worksheet to compare loan plans: Interest Rate and Payments
Term of Loan
Points and Fees
Penalties
Credit Insurance
After you have answers to these questions, start negotiating with more than one lender. Dont be afraid to make lenders and brokers compete for your business by letting them know you are shopping for the best deal. Ask each lender to lower the points, fees, or interest rate. And ask each to meet--or beat--the terms of the other lenders. Once Youve Selected a Lender, Get the Following
Think Twice before You Sign
Dont Sign on the Dotted Line if the Lender
Know that You Have Rights under the LawYou Have 3 Business Days to Cancel the LoanIf 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. Do You Think You've Made a Mistake?Has the 3-day period during which you may cancel passed and you're worried that you've gotten in over your head? Do you think your loan fees were too high? Do you believe you were steered into monthly payments you can't afford? Has your lender repeatedly pressured you to refinance? Is your loan covered by insurance you don't need or want? If you think you've been taken advantage of, state and federal laws may protect you. Also, the following organizations may be able to help:
You can learn more about credit and home equity loans by visiting the federal governments web site for consumers, www.consumer.gov (see the Home and Community section).The Mortgage Comparison Calculator allows you to compare the monthly payments and the amount of equity you will build in your home for several types of mortgages. If you dont have access to the Internet, ask a friend or relative to get the information for you. Or visit your local library or senior center, which may offer you free access to the Internet on their computers. For More InformationState Banks that Are Members of the Federal Reserve SystemFederal Reserve Consumer Help
PO Box 1200 Minneapolis, MN 55480 Federally Insured State Non-Member Banks and Savings BanksFederal Deposit Insurance Corporation
Consumer Response Center 2345 Grand Boulevard, Suite 100 Kansas City, Missouri 64108 (877) 275-3342
National Banks and National Bank-Owned Mortgage CompaniesOffice of the Comptroller of the Currency
Customer Assistance Group 1301 McKinney Street Suite 3450 Houston, TX 77010 (800) 613-6743
Federally Insured Savings and Loan Institutions and Federally Chartered Savings BanksOffice of Thrift Supervision
Consumer Programs 1700 G Street, N.W., 6th Floor Washington, DC 20552 (800) 842-6929
Federal Credit UnionsNational Credit Union Administration
Office of Public and Congressional Affairs 1775 Duke Street Alexandria, VA 22314 (800) 755-1030
For state-chartered credit unions, contact your state's regulatory agency.
Mortgage Companies and Other LendersFederal Trade Commission
Consumer Response Center - 240 600 Pennsylvania Avenue, N.W. Washington, DC 20580 (877) FTC-HELP (877-382-4357)
Other Information SourcesU.S. Department of Justice
950 Pennsylvania Ave., N.W. Washington, DC 20530 (202) 514-3301
Federal Housing Finance Board 1777 F Street, N.W. Washington, DC 20006 (202) 408-2500
Department of Housing and Urban Development 451 7th Street, S.W. Washington, DC 20410 800-669-9777
800-927-9275 (TTY) Office of Federal Housing Enterprise Oversight (OFHEO) 1700 G Street, N.W. 4th Floor Washington, DC 20552 (202) 414-6922
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Adobe acrobat version of text for printing
(119 KB PDF) is formatted for printing on two sides of a 11 x 17" sheet of paper. Fold the paper in half. The PDF contains a fillable area on the back panel for you to provide your own contact information.
Worksheet for printing (58 KB PDF) |