Loan Shopping Tips

• Seek out a licensed/bonded mortgage broker, lending company, or authorized bank or credit union.
• Be wary of loans offered through door-to-door sales or telemarketing solicitations.
• Be wary of offers made by construction companies for loans in conjunction with construction services, make sure that they are also licensed or authorized to transact loan business.
• Be wary of lenders or brokers who guarantee loan approval regardless of your credit history or rating.
• Shop around. Interest rates and fees vary widely among lenders. Don’t assume that you would not qualify for a loan from a traditional lender. Those loans are less expensive than subprime loans.
• Be suspicious of anyone who pressures you to act before you are ready.
• Verify any claims about rates, fees or your credit qualifications with another company before proceeding. Ask the loan officer to prove any claims.
• Read the entire loan application carefully before signing. Don’t sign a loan form with blank spaces.
• Make sure that every oral promise is in writing. Oral promises give you no protection.
• Ask that everything be explained to you. Give the loan officer no option but to show you the documents themselves: the rate, the costs, the loan type, the length of the loan, information about prepayment penalties, the monthly payment amount, etc.
• Watch out for hidden terms, such as prepayment penalties and balloon payments.
• Ask about fees and points before applying for a loan. The interest rate is not the only important term of a loan. A loan with a low interest rate but high fees and points may cost you more than a loan with higher interest rate and lower fees.
• If you are considering a loan with a variable interest rate, make sure you understand what conditions will affect a change in your rate, and the amount by which your rate may fluctuate.
• Consult an attorney before you sign. When you feel uncomfortable have an attorney review the transaction. It won’t cost much, but may save you a bundle.
• Make sure that you have received, read and understood all required disclosure documents before you close. At closing, make sure the loan terms have not changed from what you were told and that there are no additional fees that you did not know about.
• Contact a non-profit credit-counseling agency for assistance in determining whether you can afford your loan. Check with the National Foundation for Credit Counseling at 1-800-388-2227 to find a reputable local counselor.
• Make sure the lender and broker you are dealing with are licensed. Check the Washington Department of Financial Institutions Licensee Database and List.

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