Before entering into any agreement using your home as security for a loan, remember the following:
SHOP AROUND –
Compare all costs, not just interest rate. Sometimes with a lower rate, you may have hidden fees and costs or prepayment penalties. Get all costs in writing and compare each good faith estimate that you receive. READ ALL OF YOUR DOCUMENTS Reading all of the documents will assure you that you are receiving the loan you want. Ask to see the settlement statement one day prior to closing – federal law provides you that right. If you have questions, speak with the loan officer and get any issues resolved before closing. ASK QUESTIONS – A home loan transaction is one of the most significant financial transactions of your life. Know your interest rate, know the term, know the points and fees you are paying, know whether you pay taxes and insurance, and know how much your monthly payment will be. All of this information should be disclosed on your documents. CONSIDER HOMEOWNERSHIP COUNSELING – If you are unsure of the loan process and want to learn more or if you want to find out what you need to do to be able to buy a home, many agencies around the state provide homeownership counseling to borrowers. Some government loan programs, like FHA, will actually require counseling before completing the loan process. If you are interested, ask your lender or broker or call the Division of Banking for more information.
CALL THE DIVISION OF BANKING Toll free in state 1-800-642-9056. The Division of Banking maintains a consumer complaint program to mediate complaints between a borrower and companies licensed by the West Virginia Division of Banking. Or you may call if you have any questions about your loan process or just to find out if your lender and/or broker are licensed by this office.
DO YOUR HOMEWORK BEFORE YOU GET A LOAN …
REMEMBER! KNOW WHAT YOU ARE GETTING.
If you borrow money and use your home as security, you are obligated to make those payments. It is important to understand exactly what you are getting in a loan and that it is what YOU want.
YOU MAY LOSE YOUR HOME IF YOU DON’T MAKE TIMELY MORTGAGE PAYMENTS!!
West Virginia Division of Banking Building 3 Room 311 State Capitol Complex 1900 Kanawha Boulevard East Charleston, West Virginia 25305-0240 Phone (304) 558-2294 Fax (304) 558-0442 Toll Free 1-800-642-9056 www.wvdob.org
KNOW YOUR MORTGAGE!!
West Virginia Division of Banking
Beware of PREDATORS!!
Protect yourself from dishonest, predatory lenders. Some mortgage and home equity lenders or brokers try to pressure consumers into signing loan agreements they cannot afford or that do not match the consumers’ interests. Predatory lenders use deceptive sales tactics to get you to sign a loan before you are able to review the information. To protect yourself, keep in mind these common warning signs of predatory lending: ▪ High, above market interest rates and excessive fees. ▪ Bait and switch tactics, where a lender will offer one set of terms, then at closing pressure you into signing an agreement with higher fees and interest or prepayment penalties. ▪ Loans from door to door salespeople and loans solicited by home improvement contractors. ▪ Mail and TV ads that claim “No job? No credit? No problem! You can still qualify for a loan based on your home equity.” If it sounds too good to be true, it probably is. ▪ High pressure sales tactics to sign the documents right away before you have had a chance to review them. ▪ Loan documents with blank spaces to be filled in later.
APPRAISALS
When getting an appraisal in connection with a mortgage loan, watch for these signs of fraud or abuse: ▪ You are told the equity in your home is enough to cover the down payment or costs. ▪ Another appraisal is needed because the first one was too low. ▪ More than one appraiser contacts you about an appraisal. The loan officer may be shopping for the highest appraisal. ▪ The loan officer assures you that there will be no problem getting this loan due to your home’s value before an appraisal is done. ▪ An appraiser comes to your home and appears disinterested, doesn’t ask reasonable questions, or does not actually inspect the property, be aware that a property value may have been set to fit the loan before your property was even inspected. ▪ Always ask for identification and business card from the appraiser so that you know who they are and how to contact them.
large lump sum payment. West Virginia law requires an additional balloon disclosure, so you should know if a balloon payment is part of your loan. Prepayment penalty: A prepayment penalty is a fee you may be charged for paying off your loan early. Ask questions and know what you are getting. Credit Insurance: Some lenders will offer insurance that pays your loan if you become ill or injured or if you die, and in many cases, the premium for the insurance is financed into your loan. If you are offered credit insurance, be sure you understand the premium, how to make claims, and the cancellation policy. You must give your consent to purchase the insurance. Variable (ARM) v. fixed rate: In a fixed rate note, the interest rate never changes. With an ARM (adjustable rate mortgage), the interest rate can increase or decrease. You may have a low rate at the beginning, but be aware that the rate and payment can increase significantly throughout the term of the loan. APR (Annual Percentage Rate): This number is a measure of the cost of your loan. It is not your note rate that was used for calculating your monthly payment, which you will find on the note. This APR takes into account any charges you may be paying at closing, including points and other fees. The more fees you are paying, the higher the APR will be, but DO NOT use the APR as the sole indicator of cost. You have to look at fees and interest rate line by line, item by item to compare two loans.
►IMPORTANT TERMS TO KNOW Balloon Loan: A balloon loan has lower monthly payments during the first part of the loan term, but balloons have the lower initial payment because these payments are often interest only. At some point during the loan term, you will be obligated to pay a