What You Need to Know Before Taking Out a Loan

MORTGAGE REFINANCING

Mortgage Lock-Ins

When you're looking for a mortgage, you're likely to shop among lenders for the most favorable interest rate, and the lowest points and other up-front charges. When you find the most favorable terms and the lender that you want, you'll apply to that lender.

Lock-ins are a way to ensure that at settlement, what you requested from your lender is what you'll get.

What is a Lock-In?
A lock-in, also called a rate-lock or rate commitment, is a lender's promise to hold a certain interest rate and a certain number of points for you, usually for a specified period of time, while your loan application is processed.

Depending upon the lender, you may be able to lock in your interest rate and points when:

• you file your application
• during processing of the loan
• when the loan is approved; or
• later.

Will Your Lock-In Be in Writing?
It is wise to obtain written, rather than verbal, lock-in agreements to:

• fully understand how your lender's lock-ins work; and
• have a tangible record of your arrangements with the lender in the event of a dispute.

TIP: You should also obtain a blank copy of a lender's lock-in form to read carefully before you apply for a loan. If possible, show the lock-in form to a lawyer or real estate professional.

Will You Be Charged for a Lock-In?
Lenders may charge you a lock-in fee that may or may not be refundable if you do not close your loan. The amount of the fee and how it is charged will vary among lenders and may depend upon the length of the lock-in period.

How Long Are Lock-Ins Valid?
Lock-ins of 30 to 60 days are common but lock-in time periods may range from 7 to 120 days. Usually, the longer the period, the greater the fee.

Before deciding on the length of your lock-in:

• ask your lender to estimate (in writing, if possible) the time needed to process your loan;
• factor in any delays that might impact settlement (construction issues, etc.); and
• ask for a lock-in with as few contingencies as possible.

What Happens if the Lock-In Period Expires?
If your lock-in period expires, you might lose the interest rate and the number of points you had locked in. Most lenders will then offer the loan based on the prevailing interest rate and points, which may now be higher due to market conditions.

This information is adapted from "A Consumer's Guide to Mortgage Lock-Ins" published by the Federal Reserve Board and the Office of Thrift Supervision.

AUTO LOANS

Negotiating Your Auto Lease

You can compare different lease offers and negotiate some terms. Consider ...

• the agreed-upon value of the vehicle--a lower value can reduce your monthly payment
• up-front payments, including the capitalized cost reduction
• the length of the lease
• the monthly lease payment
• any end-of-lease fees and charges
• the mileage allowed and per-mile charges for excess miles
• the option to purchase either at lease end or earlier
• whether your lease includes "gap" coverage, which protects you if the vehicle is stolen or totaled in an accident.

Ask for alternatives to advertised specials and other lease offerings.
This information is adapted from "A Consumer Guide to Vehicle Leasing" published by the Federal Trade Commission.

Tips for buying a used car

Check out the car's repair record, maintenance costs, and safety and mileage ratings in consumer magazines or online. Look up the "blue book" value, and be prepared to negotiate the price.

Buying from a dealer? Look for the Buyers Guide from the Federal Trade Commission. It's required by a federal regulation called the Used Car Rule.

• Make sure all oral promises are written into the Buyers Guide.
• You have the right to see a copy of the dealer's warranty before you buy.
• Warranties are included in the price of the product; service contracts cost extra and are sold separately.
• Ask for the car's maintenance record from the owner, dealer, or repair shop.
• Test drive the car on hills, highways, and in stop-and-go traffic.
• Have the car inspected by a mechanic you hire.
• Check out the dealer with local consumer protection officials.
• If you buy a car "as is," you'll have to pay for anything that goes wrong after the sale.
• The Used Car Rule generally doesn't apply to private sales.

This information is adapted from "Tips for Buying a Used Car" published by the Federal Trade Commission.