Shopping for a Loan
A loan is a product just like a car. Shopping around, comparing and negotiating can help you get the best deal.
Shop around with several lenders. Home loans are available from several types of lenders - commercial banks, mortgage companies, savings and loans, and credit unions. Different lenders may quote you different prices, so contact several lenders to find the best loan at the best price
Compare loan costs. Ask lenders for information about the same loan amount, loan term and type of loan. Also, ask for a list of all closing costs and fees.
Look at the annual percentage rate (APR). The APR is the most important thing to compare when shopping for a loan. It takes into account the interest rate, points, mortgage broker fees, and other charges, expressed as a yearly rate. Generally, the lower the APR, the lower the cost of your loan. It is also important to ask if APR is fixed or adjustable - that is, will the APR change?
Ask about points and fees. These charges may not be refundable if you pay off the loan early, and you may pay extra points if you decide to refinance. Points are usually paid in cash at closing, but may also be financed. If you finance the points, you'll pay additional interest and increase the overall cost of your loan.
Know the terms of the loan. How many years will you have to make payments on the loan? If you're getting a home equity loan that consolidates credit card debt and other shorter-term loans, remember that the new loan may obligate you for a longer period.
Look at the monthly payment. Can you afford it? Will it stay the same or change?
Watch out for balloon payments. A balloon payment is a large payment that comes due at the end of the loan, often after a series of low monthly payments. If you can't come up with the money, you may be forced to take out another loan.
Watch out for prepayment penalties. Would the loan require you to pay extra fees if you pay off the loan early by refinancing or selling your home? To avoid getting trapped in a loan by prepayment penalties, try to negotiate the penalty out of your loan agreement.
Find out what happens if you miss a payment. Some loans include a provision that raises the interest rate for the rest of the loan if you miss a payment or pay late. Try to negotiate this provision out of your loan agreement.
Look at credit insurance carefully. Some lenders may imply that you must purchase expensive credit insurance in order to get loan, or they may automatically include the insurance as part of the loan agreement. Don’t agree to purchase credit insurance until you’ve studied it carefully.
We Can Help
If you have a complaint about a lender, contact us
toll free within North Carolina at 1-877-5-NO-SCAM.