If you cancel your refinance loan, the lender MORTGAGE LOANS &
must return all of the money you paid in PREDATORY LENDING
relation to that loan, including any amounts
that you paid to other parties which
provided services in connection with the
loan application process. Be aware that the
right to cancel does not apply if you cancel
the loan transaction before a closing takes
place.
Mortgage brokers and lenders work for
themselves and make money by closing
loans. The best deal for the borrower may
not be the best deal for them. The more
aggressively you shop for a loan, the better Before you get a mortgage loan to buy a
deal you will get. house, or refinance (obtain a loan on) your
existing home, you must understand certain
Make sure that you examine all of the costs THIS BROCHURE SHOULD NOT BE basic terms and concepts. If you do not, you
of obtaining a mortgage loan and not simply USED IN PLACE OF LEGAL may not get the most for your money and
the monthly loan payment required by the ASSISTANCE. BEFORE SIGNING you may not be adequately protecting your
lender. interest in the property.
MORTGAGE LOAN DOCUMENTS,
SEEK LEGAL ADVICE.
If you do not understand the documents you You may deal with a “mortgage broker”
receive get help from a knowledgeable when you first apply for a mortgage loan.
person who is not involved in the loan The mortgage broker does not loan you
transaction. money. The mortgage broker finds a
“lender” to loan you money in exchange for
Become an educated borrower. It is your a mortgage on your home. You will not get
best protection from questionable lending a loan unless you meet the requirements of
practices! the lender. It is the lender, not the mortgage
broker, who defines the “basic loan terms”
that you will be asked to agree to in order to
get the loan.
BASIC LOAN TERMS:
?
? Loan Amount – Amount you are
borrowing.
?
? Points – Fee to obtain your loan.
Each point is one percent of the loan
amount.
?
? Closing Costs – Costs you will be PREDATORY LENDING PRACTICES ?
? OFFERING ONLY SINGLE
required to pay at closing. PREMIUM INSURANCE
?
? Monthly Payment – Amount you Borrowers may be victimized by something
must pay the lender each month know n as predatory lending practices. Single premium credit insurance is
until the loan is repaid. Whether your history of paying your bills is insurance to repay your loan upon your
?
? Term - Number of years you have to good or bad, you must watch out for the death. This insurance product may cost
repay the loan. following practices: more than traditional life insurance. In
?
? Pre-Payment Penalty – Fee charged addition, you pay a single premium up
if you repay the loan early. ? SLAMMING
? front, in full at closing. If, however, the
?
? Interest Rate – Rate of interest you amount of the premium is added to your
will be paying for the length of the Slamming occurs when a lender or loan balance, then you also must pay
loan. mortgage broker changes the terms of additional interest.
?? Fixed or Variable Rate the mortgage loan just before you are
?? Rate Lock or Float scheduled to receive the loan (the loan ?
? EQUITY STRIPPING
?
? Annual Percentage Rate (APR) – “closing”). The borrower is then given
Effective interest rate charged for the choice of accepting the high cost Equity stripping may occur when you
the loan. loan or rejecting the loan. Always are refinancing (obtaining a loan on)
obtain a copy of the final loan your existing home. If you agree to
You should understand these terms and documents and disclosures at least one include the cost of refinancing as part of
receive them in writing from the lender or day before the closing to compare the the loan, rather than paying these costs
mortgage broker when you apply for the terms of the final loan documents to the with your own money, you are
loan. Make sure that the terms of the final terms you were promised earlier. “stripping” away the “equity” or “free
loan documents are the same as those you
and clear” ownership you have in your
were given when you applied for the loan. ?
? PACKING home. With a refinance you always
have a choice of paying closing costs
The loan terms can vary depending upon the Packing occurs when the lender or from available cash, or financing these
lender. Some consumers talk to several mortgage broker adds additional costs by adding them to the loan
mortgage brokers or lenders to shop for the services or goods to the mortgage loan amount. Adding the loan costs to the
best available loan terms. Study the various transaction without your knowledge or loan amount not only reduces your
offers presented to you and ask questions if consent prior to the closing. For equity, it also increases the cost of the
one lender is offering you a loan with example, the lender may add credit loan because you are paying interest on
significantly different terms than another insurance or other products to the loan the money borrowed to pay these costs.
lender. package you are receiving and add the
cost of these items to the loan balance. When refinancing, the borrower usually has
When you apply for a mortgage loan, you You are then given the choice of buying the right to cancel the transaction within
should receive a “Good Faith Estimate of the additional goods or services, or three business days after the loan closing if
Settlement Costs” from the lender. This delaying the loan closing. the loan terms are not acceptable to the
form outlines the costs you will be required
borrower.
to pay at the time the loan is closed.