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Home Equity Loans and Lines of Credit 101 (HELOC)

How To Avoid Fraud When Seeking A Home Equity Loan Or Line Of Credit

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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.
  • 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 at www.hud.gov/offices/hsg/sfh/hcc/hcc_home.cfm offsite link or call 800. 569.4287.  

 


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