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Avoiding Financial Traps

Because lending transactions often seem complicated, it's not unusual for borrowers to rely on the expertise of professionals for guidance. But what if the "professional" you choose is actually a scam artist or predator looking to push you into a costly or risky situation?

If you don't know the signs of a potential scam, you could become a victim. It's very important to recognize and avoid pitfalls and traps that can damage your credit and cause financial hardship by following these tips:

  • Say NO to "easy money". Beware if someone claims that your "credit problems won't affect your interest rate." If an offer is really appealing, get it in writing and then seek a second opinion.

  • Shop around. Always talk to several lenders to find the best mortgage loan you qualify for. A mortgage loan product or lending practice may seem reasonable until compared with a similar mortgage loan product offered by other lenders.

  • Find out about prepayment penalties. Know if the mortgage loan offered to you includes a fee if you pay off your loan early. If it is a requirement of the mortgage loan, you should ask about other products that do not contain a penalty for comparison.

  • Make sure documents are correct. Beware of anyone offering to falsify your income or other information to qualify you for a mortgage loan. You are certifying under federal law to the accuracy of your application information. Never falsify information or sign documents that you know to be false.

  • Make sure documents are complete. Do not sign documents that have incorrect dates or blank fields. Be wary of promises that a professional will "fix it later" or "fill it in later" after you've signed.

  • Ask about additional fees. Make sure you understand all of the fees that are part of your mortgage process. Question any items you didn't request or know about prior to the time you are asked to sign the mortgage loan documents.

  • Understand the total package. Ask for written estimates that include all the points and fees. Compare the annual percentage rate (APR), which combines the fees charged by the lender with the loan's interest rate over the life of the loan.

  • Work with legitimate, HUD-approved credit counselors. Beware of scam credit counseling and credit consolidation agencies. Get all the facts before deciding to combine credit card or other debts into a mortgage loan.

  • If you're not sure, don't sign. Get advice first from a reputable consumer credit counseling agency or housing counselor.


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