First, we talked about "Knowing & Understanding Your Credit." This booklet explored the important topic of credit reporting and its relationship to home buying.

In their second booklet, "Opening The Door to a Home of Your Own," we learned the steps you need to take to achieve the American Dream of home ownership. The steps are presented in a clear and straightforward manner, and the tie-in between credit and loan approval becomes clear.

The third booklet builds on the first two. In "Choosing the Mortgage That’s Right for You," the first time buyer is introduced to the difficult topic of amortizing mortgages, and we learn some of the important differences between fixed rate and adjustable loan programs.

This week, we will look at the final booklet, entitled "Borrowing Basics." As quickly as the subtitle, the prospective buyer is warned "What You Don’t Know Can Hurt You." Never have truer words been spoken than in the world of home buying, and especially for first timers.

This sixteen page booklet is an attempt at explaining the world of predatory lending. And this is a particularly difficult topic to explain to anyone, even an experienced homeowner.

In the Georgia marketplace, we have seen predatory lending most often in two settings:

1. Where unsophisticated borrowers are offered loans with extremely high interest rates and unusually high fees and costs that are well beyond reasonable market rates, and

2. Where loans are made to borrowers based solely on equity and where loans are offered to individuals who have no realistic expectation of being able to repay.

Part of the problem is that what one buyer might see as a predatory loan offer, another buyer might see as a dream opportunity.

For example, if a first time buyer with reasonably good credit is offered a loan at 10% with 2.5% points plus 3% closing, he might feel that he is being taken advantage of. But offer that same loan to a family where the bread-winner just started a new entry-level job and has a recent bankruptcy, and it can be an answer to prayer.

In our society, lenders are free to offer whatever terms and conditions they choose to offer, and it is assumed that buyers will shop and compare in the market to get the best deal they can. And that works well - most of the time.

The system can break down when uneducated and inexperienced buyers or borrowers enter the market, and when unscrupulous lenders target those same buyers and borrowers. Fortunately, Georgia’s laws have addressed this problem and predatory lending activity has decreased in the past few years.

Even so, I believe that this final Fannie Mae Booklet should be required reading for all first time buyers, who often fail to protect themselves by shopping and comparing among various lenders.

Here are some of the best points made in the brochure:

* Homeownership is a big responsibility, with obligations that often continue many years into the future. This is, in my opinion, the best advice given in the brochure.

* While most lenders want to give their customers the best possible loan options, some loan sources actually try to lend you more than you can pay back. Their true goal is not repayment. Instead, they hope you will default on the loan so they can foreclose on your home.

* It’s smart to seek a home loan from more than one source so you can be sure the loan you are offered is the best you can possibly obtain. In other words, shop and compare for the best loan you can find.

* Don’t borrow more than you need for your home purchase, even if it is offered to you. Know what you need to make your purchase, and know how you are going to pay it back.

* Be especially careful of loans with balloon payments after a few years, and also be careful of loans where the payment terms can change. If you must accept an adjustable rate loan, be sure you know how much the payments can increase and be sure you can afford these terms.

* Try to avoid being pressured into signing loan documents, and seek advice from trusted advisors before agreeing to complicated documents. Unfortunately, persons most often targeted for predatory lending may be the least likely to have competent advisors available.

The brochure concludes by giving tips on how to avoid a predatory lender.

This free booklet is a worthwhile addition to the first three brochures, and is an excellent resource for both a first time home buyer and anyone with limited financial experience as they approach refinancing.

All four of these home buying guides are available free for the asking on the internet at www.homebuyingguide.org as well as by calling 800-688-4663.