Home loan tips

Read carefully

If you are sent an ad for a mortgage, beware of phrases like these:

Low fixed rate!

The rate may last for as little as 30 days.

Very low rates!

Making payments based on such low rates may cause your loan balance to rise or force you to make a “balloon payment” at the end of the mortgage’s term.

Important information about your loan from XYZ Capital!

Another company may have obtained your lender’s name and your loan amount from public records. Read the fine print to see whether the letter is really from your mortgage company.

Questions to ask

* What is the loan’s annual percentage rate? (Experts say the APR is the best way to compare loans because it includes extra costs such as “points” and processing fees.)

* How much will your monthly payment be for each month of the loan?

* When can the payment increase and by how much?

* Does the monthly payment include amounts to pay your property taxes and homeowner’s insurance premium?

* How long is the loan’s term — 30 years, 15 years or something else?

* Will the mortgage be paid off at the end of the term, or will there be a balloon payment?

* Is there a penalty — an extra amount you must pay — if you pay off the loan early by refinancing or selling your home?

* If there is a provision for a “prepayment” penalty, how long will it be in effect? If there’s an initial “teaser” rate, can you refinance without a penalty before your interest rate and payments go up?

For more information

www.ftc.gov/credit

Click on Mortgages/Real Estate for loan shopping tips.

http://www.federalreserve.gov/ /consumers.htm

Click on Mortgages for a list of consumer publications and other information, including a handbook about adjustable-rate mortgages and foreclosure- related links.

Source: Federal Trade Commission