The Bar Association of Metropolitan St

The Bar Association of Metropolitan St. Louis
"Before You Make The Loan" Checklist

This checklist is provided as a public service by the Consumer Law Committee of The Bar Association of Metropolitan St. Louis. Its sole purpose is to help people understand the terms of proposed loans they are thinking of making. The presence of one or more "Yes" answers should not be assumed to be a negative reflection on the terms of a proposed loan or the practices of any lender, broker, loan arranger, or other commercial entity. Anyone thinking of borrowing money should carefully evaluate each proposed loan on its own terms!

What This List Is For:
This check list is to help you better understand the terms of the proposed real estate loan you are thinking of taking out.

Who This List Is For:
It’s for you, if you’re thinking of borrowing money to buy a home or refinance your current home.

How to Use This List:

First, read the list of questions.

Second, give the list to the person who wants to arrange your loan BEFORE you agree to take out the loan.

Third, ask the loan arranger to answer each questions "Yes" or "No" in the check boxes provided, sign and date the checklist in the space provided, and give the list back to you. You should keep the original. The loan arranger can make a copy if he or she wants to.

Fourth, ask the loan arranger to explain each "Yes" answer and its effect on you.

Fifth, if the loan arranger is unwilling to answer the questions or if you are not satisfied with any of the explanations, consider looking elsewhere for a loan.

IMPORTANT REMINDER: There are many other questions that you can and should ask and get answers to before you agree to take out a loan to by or refinance a house. If you don’t know what they are, you have more homework to do before you are ready to take out a loan.

To the Loan Arranger:
This checklist is to help your customer understand more about the terms of the loan you are offering. Please review the list, answer each questions "Yes" or "No", sign and date the completed answers, give the answers back to your customer, and be ready to explain any of your answers to your customer Thank you for your cooperation.

Part 1: Who Am I Dealing With?

Number	QUESTION	YES	NO
1.	Is this loan being arranged by a mortgage broker?
2.	Are you planning to sell this loan to anyone?
3.	Do you sell most or all of the loans you make?

Part 2: What Fees Am I Being Asked to Pay?

Number	QUESTION	YES	NO
4.	Will I be charged a fee by anyone for arranging this loan?
5.	Is anyone being paid a "yield spread premium" fee, a referral fee, or other similar fee in connection with this loan?
6.	Will I be charged a "loan origination" fee, plus extra fees for preparing documents or underwrititng?
7.	Will I be charged more for credit reports than they actually cost you or the lender to get?
8.	Will I be charged for more than one appraisal on the house?
9.	Will I be charged more for recording fees than they actually cost you or the lender?
10.	Will I be charged a broker's fee?

Part 3: What are the Terms of this Loan?

Number	QUESTION	YES	NO
11.	Will I have to pay more than 28% of my gross income to make the payments on this loan?
12.	Will I be asked to get a co-signer to get this loan?
13.	Will I be charged an interest rate of more than 3 points above the prime rate on this loan?
14.	Will I be charged fees or "points" of more than 3% of the amount of the loan?
15.	Will there be a balloon payment at the end of this loan?
16.	Will the amount of my monthly payment be enough to make my outstanding balance go down each month?
17.	Am I buying credit life or disability insurance as part of this loan?
18.	Is there a penalty if I pay off the loan early?
19.	Is there a mandatory arbitration clause in this loan?
20.	Will you make me pay off old debts in order to get this loan?
21.	Will this loan turn some of my unsecured debt into secured debt?
22.	Is this loan going to be for more than the value of my house?
23.	In combination with other loans I will have on my house, will this loan be for more than the value of my house?

Part 4: Special Questions for Mortgage Brokers

Number	QUESTION	YES	NO
24.	Did you contact only one lender about my loan?
25.	Did any lender offer or qualify me for a lower interest rate than the loan you are presenting to me?

Part 5: If This is a Refinancing, How Does It Compare to My Situation Now?

Number	QUESTION	YES	NO
26.	If this loan is for a refinancing, am I being asked to give up part-ownership of my house?
27.	If this is a refinancing, would it cost me less interest and fees to simply take out a second loan for the new money I want to borrow now, rather than to completely refinance my house?
28.	If this is a refinancing, will my new interest rate be higher than my old one?
29.	If this is a refinancing, will my new monthly payment be higher than my old one?
30.	If this is a refinancing, will I pay more interest over the life of this new loan than I would have paid over the life of my old loan?

Part 6: Last, But Not Least...

Number	QUESTION	YES	NO
31.	Are you going to ask me to sign any forms on which the blanks have not all been filled in?
32.	Are you going to ask me to sign any forms you haven't explained to me?
33.	Are you going to ask me to sign any forms you haven't given me the chance to read?

These questions answered by:         _____________________________________________
                                                                (signature)                                                        (date)

                                                                _____________________________________________
                                                                (print name)

_____________________________________________
(address and phone)

_____________________________________________
(title)

_____________________________________________
(company)