The Commission is headed by five Commissioners, nominated by the President and
confirmed by the Senate, each serving a seven-year term. The President chooses
one Commissioner to act as Chairman. No more than three Commissioners can be of
the same political party.
Shopping around for a home loan or
mortgage will help you to get the best financing deal. A mortgage—whether
it's a home purchase, a refinancing, or a home equity loan—is a
product, just like a car, so the price and terms may be negotiable.
You'll want to compare all the costs involved in obtaining a
mortgage. Shopping, comparing, and negotiating may save you
thousands of dollars.
Obtain Information from Several
Lenders
Home loans are available from several
types of lenders—thrift institutions, commercial banks, mortgage
companies, and credit unions. Different lenders may quote you
different prices, so you should contact several lenders to make sure
you're getting the best price. You can also get a home loan through
a mortgage broker. Brokers arrange transactions rather than lending
money directly; in other words, they find a lender for you. A
broker's access to several lenders can mean a wider selection of
loan products and terms from which you can choose. Brokers will
generally contact several lenders regarding your application, but
they are not obligated to find the best deal for you unless they
have contracted with you to act as your agent. Consequently, you
should consider contacting more than one broker, just as you should
with banks or thrift institutions.
Whether you are dealing with a lender
or a broker may not always be clear. Some financial institutions
operate as both lenders and brokers. And most brokers'
advertisements do not use the word "broker." Therefore, be
sure to ask whether a broker is involved. This information is
important because brokers are usually paid a fee for their services
that may be separate from and in addition to the lender's
origination or other fees. A broker's compensation may be in the
form of "points" paid at closing or as an add-on to your
interest rate, or both. You should ask each broker you work with how
he or she will be compensated so that you can compare the different
fees. Be prepared to negotiate with the brokers as well as the
lenders.
Obtain All Important Cost Information
Be sure to get information about
mortgages from several lenders or brokers. Know how much of a down
payment you can afford, and find out all the costs involved in the
loan. Knowing just the amount of the monthly payment or the interest
rate is not enough. Ask for information about the same loan amount,
loan term, and type of loan so that you can compare the information.
The following information is important to get from each lender and
broker:
Rates
Ask each lender and broker for a list
of its current mortgage interest rates and whether the rates being
quoted are the lowest for that day or week.
Ask whether the rate is
fixed or adjustable. Keep in mind that when interest rates for
adjustable-rate loans go up, generally so does the monthly payment.
If the rate quoted is for an adjustable-rate loan, ask how your rate
and loan payment will vary, including whether your loan payment will
be reduced when rates go down.
Ask about the loan's annual
percentage rate (APR). The APR takes into account not only the
interest rate but also points, broker fees, and certain other credit
charges that you may be required to pay, expressed as a yearly rate.
Points
Points are fees paid to the lender or
broker for the loan and are often linked to the interest rate;
usually the more points you pay, the lower the rate.
Check your local newspaper for
information about rates and points currently being offered.
Ask for
points to be quoted to you as a dollar amount—rather than just as
the number of points—so that you will actually know how much you
will have to pay.
Fees
A home loan often involves many fees,
such as loan origination or underwriting fees, broker fees, and
transaction settlement, and closing costs. Every lender or broker
should be able to give you an estimate of its fees. Many of these
fees are negotiable. Some fees are paid when you apply for a loan
(such as application and appraisal fees), and others are paid at
closing. In some cases, you can borrow the money needed to pay these
fees, but doing so will increase your loan amount and total costs.
"No cost" loans are sometimes available, but they usually
involve higher rates.
Ask what each fee includes. Several
items may be lumped into one fee.
Ask for an explanation of any fee
you do not understand.
Down Payments and Private Mortgage Insurance
Some lenders require 20 percent of
the home's purchase price as a down payment. However, many lenders
now offer loans that require less than 20 percent down—sometimes
as little as 5 percent on conventional loans. If a 20 percent down
payment is not made, lenders usually require the home buyer to
purchase private mortgage insurance (PMI) to protect the lender in
case the home buyer fails to pay. When government-assisted programs
such as FHA (Federal Housing Administration), VA (Veterans
Administration), or Rural Development Services are available, the
down payment requirements may be substantially smaller.
Ask about the lender's requirements
for a down payment, including what you need to do to verify that
funds for your down payment are available.
Ask your lender about
special programs it may offer.
If PMI is required for your loan,
Ask what the total cost of the
insurance will be.
Ask how much your monthly payment will be when
including the PMI premium.
Ask how long you will be required to
carry PMI.
Obtain the Best Deal That You Can
Once you know what each lender has to
offer, negotiate for the best deal that you can. On any given day,
lenders and brokers may offer different prices for the same loan
terms to different consumers, even if those consumers have the same
loan qualifications. The most likely reason for this difference in
price is that loan officers and brokers are often allowed to keep
some or all of this difference as extra compensation. Generally, the
difference between the lowest available price for a loan product and
any higher price that the borrower agrees to pay is an overage. When
overages occur, they are built into the prices quoted to consumers.
They can occur in both fixed and variable-rate loans and can be in
the form of points, fees, or the interest rate. Whether quoted to
you by a loan officer or a broker, the price of any loan may contain
overages.
Have the lender or broker write down
all the costs associated with the loan. Then ask if the lender or
broker will waive or reduce one or more of its fees or agree to a
lower rate or fewer points. You'll want to make sure that the lender
or broker is not agreeing to lower one fee while raising another or
to lower the rate while raising points. There's no harm in asking
lenders or brokers if they can give better terms than the original
ones they quoted or than those you have found elsewhere.
Once you are satisfied with the terms
you have negotiated, you may want to obtain a written lock-in from
the lender or broker. The lock-in should include the rate that you
have agreed upon, the period the lock-in lasts, and the number of
points to be paid. A fee may be charged for locking in the loan
rate. This fee may be refundable at closing. Lock-ins can protect
you from rate increases while your loan is being processed; if rates
fall, however, you could end up with a less favorable rate. Should
that happen, try to negotiate a compromise with the lender or
broker.
Remember: Shop, Compare, Negotiate
When buying a home, remember to shop
around, to compare costs and terms, and to negotiate for the best
deal. Your local newspaper and the Internet are good places to start
shopping for a loan. You can usually find information both on
interest rates and on points for several lenders. Since rates and
points can change daily, you'll want to check your newspaper often
when shopping for a home loan. But the newspaper does not list the
fees, so be sure to ask the lenders about them.
The Mortgage Shopping Worksheet that
follows may also help you. Take it with you when you speak to each
lender or broker and write down the information you obtain. Don't be
afraid to make lenders and brokers compete with each other for your
business by letting them know that you are shopping for the best
deal.
Fair Lending Is Required by Law
The Equal Credit Opportunity Act
prohibits lenders from discriminating against credit applicants in
any aspect of a credit transaction on the basis of race, color,
religion, national origin, sex, marital status, age, whether all or
part of the applicant's income comes from a public assistance
program, or whether the applicant has in good faith exercised a
right under the Consumer Credit Protection Act.
The Fair Housing Act prohibits
discrimination in residential real estate transactions on the basis
of race, color, religion, sex, handicap, familial status, or
national origin.
Under these laws, a consumer cannot
be refused a loan based on these characteristics nor be charged more
for a loan or offered less favorable terms based on such
characteristics.
Credit Problems? Still Shop, Compare,
and Negotiate
Don't assume that minor credit
problems or difficulties stemming from unique circumstances, such as
illness or temporary loss of income, will limit your loan choices to
only high-cost lenders.
If your credit report contains
negative information that is accurate, but there are good reasons
for trusting you to repay a loan, be sure to explain your situation
to the lender or broker. If your credit problems cannot be
explained, you will probably have to pay more than borrowers who
have good credit histories. But don't assume that the only way to
get credit is to pay a high price. Ask how your past credit history
affects the price of your loan and what you would need to do to get
a better price. Take the time to shop around and negotiate the best
deal that you can.
Whether you have credit problems or
not, it's a good idea to review your credit report for accuracy and
completeness before you apply for a loan. To order a copy of your
credit report, contact:
Fees
Different
institutions may have different names for some fees and
may charge different fees. We have listed some typical
fees you may see on loan documents.
Application
fee or Loan processing fee
Origination
fee or Underwriting fee
Lender
fee or Funding fee
Appraisal
fee
Attorney
fees
Document
preparation and recording fees
Broker
fees (may be quoted as points, origination fees, or
interest rate add-on)
Credit
report fee
Other
fees
Other
Costs at Closing/Settlement
Title
search/Title Insurance
For lender
For you
The FTC works for the consumer to
prevent fraudulent, deceptive and unfair business practices in the
marketplace and to provide information to help consumers spot, stop
and avoid them. To file a complaint, or to get free information on
any of 150 consumer topics, call toll-free, 1-877-FTC-HELP
(1-877-382-4357), or use the online complaint form. The FTC enters
Internet, telemarketing, identity theft and other fraud-related
complaints into Consumer Sentinel, a secure, online database
available to hundreds of civil and criminal law enforcement agencies
U.S. and abroad.
--End--
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