10
Steps to Avoiding Borrowing Pitfalls
Shop around. Borrowers should talk to several lenders to
find the best loan for which they qualify. 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.
Understand the loan terms. Borrowers should compare loan terms
from different lenders. A nonprofit housing counselor or a lawyer
can review the information with a borrower.
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.
Say NO to "easy money". Borrowers should beware
if someone claims "their credit problems won't affect the interest
rate."
Make sure documents are correct. Be cautious of someone that
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.
Make sure documents are complete. 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."
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.
Work with credit counselors. A borrower should get all the
facts before deciding to combine credit card or other debts into
a home loan. Talk to a consumer credit counseling agency or nonprofit
housing counselor before signing the loan documents.
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.
If not sure, don't sign. Talk to a consumer credit counseling
agency or nonprofit housing counselor.
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