What are possible warning signs of a predatory loan?
Answers for Buyers

Here is a list of the possible warning signs of predatory lending:

1.  It sounds too easy.   "Guaranteed Approval" or "no income verification" regardless of your current employment, credit history, and assets.  The lender is basically saying, "I don't care if you can afford to make the payments over the long haul."

2.  Large Future Costs.   High-risk adjustable rate mortgages where the payment rises a lot after a short introductory period are seldom appropriate for families who already have had problems repaying other loans in the past.

3.  Excessive Fees.  Higher lender and/or mortgage broker fees than are typical in your market.  Because these costs can be financed as part of the loan, they are easy to disguise or downplay.  A typical predatory loan may cost 5% or more.

4.  Over-valued Property.  The mortgage company will have the appraiser inflate the value of the home to allow excessive fees to be included in the loan and results in the borrower owing more to the bank than the home is worth.

5.  Closing Delays.  The lender deliberately delays closing so the commitment on a reasonably priced loan expense.

6.  Barriers to Refinancing.  Prepayment penalties that make it hard for a borrower to refinance in order to pay off a high-cost loan by taking advantage of a low-cost loan.

7.  No Down Payment Loans.  These loans may be split into two mortgages, with one having a much higher cost.  Check you finances and make sure you can afford the payments, especially for the long-term.

8.  Unethical Document Management.  An ethical lender or broker will always require you to sign key loan papers, and they will never ask you to sign a document dated before the date you actually sign it.