I

f you decide that the timings right for a home

equity loan, ask your friends or family for recommendations of lenders. Then, comparison shop.

Comparing loan plans will help you get a better deal.

Contact 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.

Ask all 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.

Also 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.

Negotiate with more than one lender. Dont be

afraid to make lenders and brokers compete for your

Shopping for a Home Equity Loan?

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.

Before 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.

To Learn More

For more information about shopping for a

home equity loan and a glossary of home loan terms,

call the FTCs Consumer Response Center toll-free at

1-877-FTC-HELP (382-4357). Ask for a free copy of

Looking for the Best Mortgage: Shop, Compare,

Negotiate; High-rate, High-fee Loans (Section 32

Mortgages); and Home Equity Loans: The ThreeDay Cancellation Rule. Or visit us online at

www.ftc.gov.

FTC Consumer Alert

Federal Trade Commission ■ Bureau of Consumer Protection ■ Office of Consumer and Business Education

Shopping List

Your Credit Report

Because 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:

4 Equifax: (800) 685-1111

4 Experian (formerly TRW):

(888) EXPERIAN (397-3742)

4 Trans Union: (800) 916-8800

These agencies may charge you up to $ 9.00 for

your credit report.
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? _____________________________________________

When? _____________________________________________

How often? _____________________________________________

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 _____________________________________________

Appraisal fee _____________________________________________

Document preparation and recording fees _____________________________________________

Broker fees _____________________________________________

Other fees _____________________________________________

Are any of the application fees refundable

if you dont get the loan? _____________________________________________

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? _____________________________________________

What is the penalty if you pay off or

refinance the loan early? _____________________________________________

Does the loan include optional credit insurance? _____________________________________________

(You dont have to accept optional credit

insurance to get your loan.)

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? _____________________________________________

Home Equity Loan Shopping List Home Equity Loan Shopping List

Lender A Lender B Lender C

January 2001

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