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Want To Consolidate Your Debts?
Putting Your Home On The
Loan Line Is Risky Business

... Continued From Previous Page

After you have answers to these questions, start negotiating with more than one lender. Don't be afraid to make lenders and brokers compete for your business by letting them know you are shopping for the best deal. Ask each lender to lower the points, fees, or interest rate. And ask each to meet--or beat--the terms of the other lenders.

Once You've Selected a Lender, Get the Following

A Good Faith Estimate  of all loan charges. The estimate must be sent within 3 days of applying.

Blank copies of the forms you'll sign at closing, when the loan is final. Study them. If you don't understand something, ask for an explanation.

Advance copies of the forms you'll sign at closing with the terms filled in. A week or two before closing, contact the lender to find out if there have been any changes in the Good Faith Estimate. By law, you can inspect the final settlement statement (also called the HUD-1 or HUD-1A form) one day prior to closing. Study these forms. Write down any questions you want to ask.

Think Twice before You Sign

Have a knowledgeable friend, relative, attorney, or housing counselor review the Good Faith Estimate and other loan papers before you sign the loan contract. Be sure the terms are the same ones you agreed to. For example, a lender should not promise one APR and then--without good reason--increase it at closing.

Refer to the list of questions you've written down. Ask where these terms are covered in the loan contract. And ask for an explanation of any dollar amount or term you don't understand. Don't let anyone rush you into signing the loan contract.

Make sure all promises, oral and otherwise, are put in writing. It's only what's in writing that counts.

Get a copy of the documents you signed before you leave the closing.

Don't Sign on the Dotted Line if the Lender ...

Tells you to falsify information on the loan application (for example, suggests that you write down more income than you really have).

Pressures you into applying for a loan for more money than you need, or one that has monthly payments larger than you can afford.

Promises one set of terms but gives you another with no good reason for the change.

Tells you to sign blank forms or forms that aren't completely filled in. If an item is supposed to be blank, draw a line through the space and initial it.

Pressures you to sign today. A good deal today should be available tomorrow.

Know that You Have Legal Rights

You Have 3 Business Days to Cancel the Loan

If you're using your home as security for a home equity loan (or for a second mortgage loan or a line of credit), federal law gives you 3 business days after signing the loan papers to cancel the deal--for any reason--without penalty. You must cancel in writing. The lender must return any money you have paid to date.

Do You Think You've Made a Mistake?

Has the 3-day period during which you may cancel passed and you're worried that you've gotten in over your head? Do you think your loan fees were too high? Do you believe you were steered into monthly payments you can't afford? Has your lender repeatedly pressured you to refinance? Is your loan covered by insurance you don't need or want?

If you think you've been taken advantage of, state and federal laws may protect you. Also, the following organizations may be able to help:

Your local or state bar association--sometimes listed under "Lawyers Referral Service" in the Yellow Pages of your phone book. The association may be able to refer you to low-cost or no-cost lawyers who can help.

Your local consumer protection agency, state attorney general's office, or state office on aging, listed in the Blue Pages of your phone book.

Your local fair housing group or affordable housing agency, housing counseling agency, or state housing agency.


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