Finding a good mortgage that you can afford and that has no hidden fees or penalties leads to a happy homeownership experience without the fear of foreclosure lurking around the corner.

Be a smart consumer! If you need assistance or don’t understand something, ask a credit counselor, a homebuying counselor, an attorney or your REALTOR^®. Your REALTOR^® cannot give you legal or financial advice, but he or she can help you obtain the information or the assistance that you need. Information about credit, mortgages and homebuying, including articles to read and interactive Internet lessons, are available on the WRA website at www.wra.org/mortgages. Knowledge gives you power!

Manage your money wisely 

A borrower’s credit history is his or her responsibility. Review your income and expenses, monitor your credit report and borrow within your budget. Remember there are more costs associated with buying a house than just the mortgage cost.

Find out your credit score 

FICO scores (the most commonly used system) range from 300-850. The higher the score, the lower your interest rate and monthly payments will be on a mortgage loan. Scores over 700 or 720 are very good and mean you qualify for the best interest rates, while scores below 620 or 600 are considered high risk, leading to much higher interest rates or rejection of your application. Low scores can be improved by paying bills on time and keeping credit card and other debt balances low.

Shop around for the best loan available 

Talk to several lenders to find the best loan for which you can qualify. Compare the APR (annual percentage rate) and other fees charged. If a lender says that they are your only chance of getting a loan or owning your own home, keep on looking.

Tell the truth 

Don’t inflate your earnings or falsify other information to qualify for a loan -- you can end up with payments you cannot afford to make. A mortgage professional who falsely alters information to qualify you for a loan is committing fraud. Borrowers should never sign documents that they know to be false — that too is fraudulent.

Say no to “easy money” 

If someone claims, “Guaranteed Approval” or “No Income Verification,” regardless of employment, credit or assets, they are not telling the whole story about other fees and loan terms and don’t care whether the consumer can afford to make the payments. Beware of “No Money Down” loans, which may be a scheme to entice consumers to purchase property that they likely cannot afford or are not qualified to buy.

Understanding loan terms 

Borrowers should compare loan terms from different lenders to evaluate what is affordable and the best loan.

Know the loan application fee 

Is it refundable?

Know the annual percentage rate (APR) 

This is the cost of your credit, stated as a yearly rate.

Know the finance charge 

The finance charge is the cost of the credit, stated as a dollar amount.

Know the amount financed 

This is the dollar amount of the loan or credit that is provided by the lender.

Is the interest rate fixed or adjustable? 

Some adjustable rate mortgages start out with very low “teaser” rates and steeply rise after two or three years.

Know if you are paying “points” 

“Points” are prepaid finance charges to obtain a secured real estate loan and are not refundable.

Know the total number and exact dollar amount of each payment 

Do monthly payments include property taxes and insurance? Does the payment amount change? Also consider any “balloon payments,” which occur when the scheduled payments do not pay off the amount financed.

Are there prepayment penalties? 

Prepayment penalties should be a choice, not a requirement.

Know the payment due date 

This is the date the payment must be received by the lender.

Know about collateral 

Collateral is property that is used to secure a loan. If you default on the loan, the lender may take your collateral. In a real estate loan your home is your collateral.

Ask about additional fees 

Ask what other fees are involved and question any items you didn’t ask for. Beware of inflated fees! Review every fee and compare different lenders to ensure the most competitive loan terms.