The lender contacts you in person, at home, by mail or telephoneYou are told you’ll be approved, regardless of your creditYou’re told you must lie about your income to get the loanYou’re told to stop making payments on your current loan or to other creditorsYou’re told to send payments for your current loan directly to the person or company offering you the new loanThe interest rate may increase over the course of the loan - an Adjustable Rate Mortgage (ARM)The loan includes a prepayment penaltyThere is a large payment at the end of the loan - sometimes called a ‘Balloon’ paymentThe lender pressures you to sign the papers ‘NOW’ if you want the dealYou’re told not to worry about the ‘fine print’ - sometimes the lender will pretend to explain it to you rather than to give you time to read it - don’t feel pressured – make sure to take the time to read the fine print.You’re asked to sign, or ‘deed,’ your home over to the lender.The loan is suggested to you by someone offering you home improvement repairsYou’re asked to sign documents with blanks or in a language you don’t understandIf Something Sounds Too Good to Be True - it usually isHOW CAN I PROTECT MYSELF?If you are not already familiar with basic real estate terms, it can be helpful to familiarize yourself on commonly used real estate terms before signing documents. Here are some commonly used terms:
Refinance: replacing an existing loan with one with different termsTerms: refers to interest rates, repayment period, type of interestHome Equity Loan: loan in which your home is used as collateralBalloon Payment: a lump sum payment paid at the end of the loan termFixed Rate Mortgage: a loan where the interest rate does not changeAdjustable Rate Mortgage (ARM):a loan where the interest rate may increase during the life of the loanPrepayment Penalty: a charge to pay off the loan early, usually when the loan is refinancedNegative Amortization or Interest Only Loan: your loan balance INCREASES as you make your paymentsIf you are concerned with the terms of your loan agreement, consider talking to an attorney or housing agency before you sign it. If you have already signed the loan agreement and are concerned that you may have a legal issue, you may want to contact an attorney. If you believe that you have been the victim of consumer fraud, file a complaint with the Arizona Attorney General’s Office.
Free & Reduced Fees Legal Aid Resources
Find Free Legal Help
Please select your county of residence below.
Loans and Your Home: Know the Danger Signs
Getting a mortgage, refinancing a mortgage or taking out a home equity loan shouldn’t be scary - but the wrong agreement can cost you unnecessary interest charges and fees, and may even cost you ownership of your home. This information can help you protect yourself from risky loan agreements.
Possible warning signs of a risky loan agreement
Although many mortgage lenders are reputable, there are some lenders who may take advantage of a homebuyer. Here are some possible warning signs of a risky loan agreement. These are things that you want to look for if you are purchasing a home. One effective way to protect yourself is to learn about the lending process and about the mortgage lender specifically before meeting with a lender.