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When it comes to buying a home, predatory lending is something you should try to avoid. In the last few years, predatory lending has been given a new definition. Here are a few things to watch out for:
- Guaranteed Approval: If you're guaranteed approval, the lender is only concerned about the moment, not your ability to continue making payments and stay in the home. A lender will need to process your loan and things can go wrong. So, a lender that guarantees anything can be a red flag. Be sure the lender wants to have a discussion to assess your needs and is interested in your financial future.
- High Fees: Discuss all the fees up front and make sure those fees are reasonable for your market. Ask for a good faith estimate and compare quotes from at least three sources to check market rates.
- Balloon Payments, Adjustable Rates or Prepayment Penalties: Avoid loans that involve future costs because no one can predict the future. Instead, opt for a fixed-rate loan, with no balloon payment and no prepayment penalties, even if the rate is higher. Typically, you can stay out of special-structured loan trouble if you stay with basic loan products.
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