General Housing Information Article


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.  

  • The lender contacts you in person, at home, by mail or telephone

  • You are told you’ll be approved, regardless of your credit

  • You’re told you must lie about your income to get the loan

  • You’re told to stop making payments on your current loan or to other creditors

  • You’re told to send payments for your current loan directly to the person or company offering you the new loan

  • The interest rate may increase over the course of the loan - an Adjustable Rate Mortgage (ARM)

  • The loan includes a prepayment penalty

  • There is a large payment at the end of the loan - sometimes called a ‘Balloon’ payment

  • The lender pressures you to sign the papers ‘NOW’ if you want the deal

  • You’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 repairs

  • You’re asked to sign documents with blanks or in a language you don’t understand

  • If Something Sounds Too Good to Be True - it usually is

HOW 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 terms

  • Terms: refers to interest rates, repayment period, type of interest

  • Home Equity Loan: loan in which your home is used as collateral

  • Balloon Payment: a lump sum payment paid at the end of the loan term

  • Fixed Rate Mortgage: a loan where the interest rate does not change

  • Adjustable Rate Mortgage (ARM):a loan where the interest rate may increase during the life of the loan

  • Prepayment Penalty: a charge to pay off the loan early, usually when the loan is refinanced

  • Negative Amortization or Interest Only Loan: your loan balance INCREASES as you make your payments

If 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.


Comments:

QUESTIONS

  • I am currently working with HUD Counselor for two years. Is there a time frame for working these modifications? Also in bankruptcy; does this effect the loan modification process?
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  • Is it legal to sell meat without the weight and cost per pound identified?

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  • i realize the landlord is responsible for habitable property, do they have to pay for another rental for my family and relocate us due to mold in apt which is not my fault. who pays?
  • I allowed an ex to move back in while she "got on her feet." She has never paid rent or utilities and we have no written agreement altho it was understood at the time to be a short-term favor. It is now over 2 years and she says she doesn't want to move out until she can afford her own place. When we met 3 years ago she was renting a room in a house which is what I am suggesting she do again now - what are my legal options in terms of requiring her to move out?
  • Hello, my husband & I purchased an older home in Aug. The Sellers listed on the disclosure statement that they treated for roof rats. However, they didn't solve the issue. It has taken us 6 months to resolve the problem not to mention a lot of money. Since it was listed on the disclosure statement, do we have any recourse?
  • I am currently in the midst of a civil dispute with the co-buyer of a house I recently purchased back in April of 2015. I have been removed from the house temporarily with an order of protection which I am currently in the process of contesting. The co-buyer is demanding I remove my name from the title. I currently have an indemnity agreement that was signed by the co-buyer, but it doesnt protect me from the mortgage company, only the co-buyer. How can I force a Judicial Sale of the house so that hes forced to refinance and take my name off the mortgage? That or the house goes to the highest
  • I have a question concerning the law about zoning your property. My parents own 5 acres of land. They would like to if they are able to sell a couple acres to me. We are un sure if the law would alow this. Since there property is zoned for 5 acres.
  • I work at home and currently have Joint 50/50 decision-making and parenting time. If I continue to exercise my first right of refusal while the other party is working would that be helpful when going back to court post-decree to help get more time with the children?

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STORIES

LegalLEARN

FIND LEGAL HELP

  • Please select your county of residence below.

    County:
     

OTHER LEGAL RESOURCES

  • State Bar of Arizona
    www.azbar.org
  • Maricopa County Bar
    www.maricopabar.org
    Referral number 602-257-4434
  • Pima County Bar
    www.pimacountybar.org
    Referral number 520-623-4625
  • National Domestic Violence Hotline
    800-799-7233
  • Bankruptcy Court Self Help Center
    866-553-0893
  • Certified Legal Document Preparer Program
    Link

ORGANIZATIONS

Documents

.pdf  AzMortgageResource.gov ReadSpeaker

.pdf  AZ Renters Guide ReadSpeaker

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WHAT IF I RENT A HOUSE THAT'S IN FORECLOSURE - The Protecting Tenants at Foreclosure Act

FORECLOSURE DEFICIENCIES IN ARIZONA: Will I still owe money after a foreclosure?

Where can I find legal help with a foreclosure?

Did you know the Arizona Attorney General’s Office has a wide range of statewide assistance programs funded through the national mortgage settlement that could benefit you or people you know?

Legal Tips for Tenants

LINKS

Low Income Home Energy Assistance Program (LIHEAP)

https://www.lawforseniors.org/
https://www.lawforveterans.org
https://lawforkids.org/
https://www.azcourthelp.org/