Applying for a home loan can be stressful and complicated. But don’t let your need for credit get you into a bad loan.
North Carolina has some of the toughest laws against unfair loans in the nation and was the first state to adopt a comprehensive law against predatory home loans. These laws help protect you from bad loans.
To avoid becoming a victim of predatory lending:
- Stay away from loans offered through door-to-door sales or telemarketing calls.
- Beware of loan offers made by construction companies in conjunction with construction services.
- Beware of lenders or brokers who guarantee you a loan regardless of your credit history or rating.
- Shop around. Interest rates and fees vary widely among lenders. Don’t assume that you won’t qualify for a loan from a traditional lender. Those loans are less expensive than subprime loans.
- Be suspicious of anyone who tries to pressure you into a loan before you’re ready.
- Read the entire loan application carefully before signing. Don’t sign a loan form with blank spaces.
- Make sure that you have received, read and understood all required disclosure documents before closing.
- At closing, make sure the loan terms have not changed from what you were told before and that there are no additional fees you didn’t know about.
- Have an attorney review the documents before you sign.
- Ask about fees and points. The interest rate is not the only important term of a loan. A loan with a low interest rate but high fees and points may cost you more than a loan with a higher interest rate and lower fees.
- If you are considering a loan with a variable interest rate, make sure you understand what conditions will affect a change in your rate, and the amount your rate could go up or down.
- Watch out for hidden terms, such as prepayment penalties (fees you’ll have to pay if you pay off your loan early or sell your house) and balloon payments (large payment due at the end of your loan).
- Contact a nonprofit credit counseling agency for help deciding if you can afford a loan. Check with the National Foundation for Credit Counseling at 1-800-388-2227 to find a reputable local counselor.
- Make sure the lender and broker you’re dealing with are licensed. Check with the N.C. Commissioner of Banks at (919) 733-3016.
Predatory Lending Practices Include:
- Asset-Based Lending: The lender makes a loan based on the equity in your home, whether or not you can make the payments. If you cannot make payments, you could lose your home through foreclosure.
- Loan Flipping: A lender refinances your loan with a new long-term high-cost loan. Each time the lender “flips” the existing loan, you must pay points and assorted fees.
- Packing: You receive a loan that contains charges for services you did not request or need. “Packing” most often involves the forced purchase of credit insurance.
- Hidden Balloon Payments: You believe that you have applied for a low rate loan requiring low monthly payments only to learn at closing that it is a short term balloon loan that you will have to refinance within a few years.
- Discrimination: The lender charges a minority consumer more than a similar consumer who is not a member of a minority group would be charged.
We Can Help
If you have a complaint about a predatory loan, contact us toll free within North Carolina at 1-877-5-NO-SCAM.