If you decide
that the , ask your friends or family for recommendations of lenders.
Then, comparison shop. Comparing loan plans will help you get a better
for a Home Equity Loan?
several lenders, not just the ones that send you mail, call you,
or knock on your door. Talk with banks, savings and loans, credit
unions, mortgage companies, and mortgage brokers. Remember, brokers
dont lend money: they help arrange loans.
the lenders you interview to explain the loan plans they have for
you. If you dont understand any loan terms and conditions,
ask questions. They could mean higher costs. Knowing just the amount
of the monthly payment or the interest rate is not enough. Pay close
attention to fees, including: the application or loan processing
fee, origination or underwriting fee, lender or funding fee, appraisal
fee, document preparation and recording fees, and broker fees which
may be quoted as points, origination fees, or interest rate add-on.
If points and other fees are added to your loan amount, youll
pay more to finance them.
ask for your credit score. Credit scoring is a system creditors
use to help determine whether to give you credit. Information about
you and your credit experiences like your bill-paying history,
the number and type of accounts you have, late payments, collection
actions, outstanding debt, and the age of your accounts is
collected from your credit application and your credit report. Creditors
compare this information to the credit performance of consumers
with similar profiles. A credit scoring system awards points for
each factor that helps predict who is most likely to repay a debt.
A total number of points your credit score helps predict
how creditworthy you are, that is, how likely it is that you will
repay a loan and make the payments when theyre due.
with more than one lender. Dont be afraid to make lenders
and brokers compete for your business by letting them know that
youre shopping for the best deal. Ask each lender to lower
the points, fees or the interest rate. And ask each to meet
or beat the terms of the other lenders.
you sign, read the loan closing papers carefully. If the loan isnt
what you expected or wanted, dont sign the loan. Either negotiate
changes or walk away. You also generally have the right to cancel
the deal for any reason and without penalty within
three days after signing the loan papers. The lender must return
any money youve paid to date.
your credit report is an important part of many credit scoring systems,
its very important to make sure its accurate before
you submit a credit application. To get copies of your report, contact
the three major credit reporting agencies:
Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800
agencies may charge you up to $8.50 for your credit report.
Questions to ask/check and compare between 3 lenders
What are the monthly payments?
What is the Annual Percentage Rate (APR)?
(the cost of credit expressed as a yearly rate; includes the interest
rate, points, broker fees, and other credit charges)
What is the interest rate?
(the cost of borrowing money expressed as a percentage rate)
Will the interest rate change?
By how much?
What will you have to pay in points?
What will you have to pay in fees?
Application or loan processing fee
Origination or underwriting fee
Lender or funding fee
Document preparation and recording
Are any of the application fees refundable if you don't get the
How many years will you have to repay the loan?
Is this an installment loan or a line of credit?
Is there a balloon payment?
What are the total closing costs?
If you use a broker, how will he or she be paid?
What is the penalty for late or missed payments?
Does the loan include optional credit insurance?
(You don't have to accept optional credit insurance to get your
If you want optional credit insurance, can you pay for it monthly
instead of financing the premiums as part of your loan?
Did you get a copy of your credit score?
Can you afford this loan?