You choice of lender will influence not only you settlement costs, but also the monthly cost of you mortgage loan.

Lending institutions may require certain settlement services, such as a new survey or title insurance and the may charge you for other settlement related services, such as appraisal or credit report. You may find, in shopping for a lender, that other institutions may not have such requirements. Part Two of this information provides a description of the various kinds of services that may be required and fees that may be charged to you. You will also find a worksheet in Part Two, which you can use to compare requirements and cost estimates from different lenders.

Many lending institutions deal regularly with certain companies, attorneys, appraisers, surveyors, and others in whom they have confidence. They may want to arrange for settlement services to be provided through these parties. This information discusses you rights in such a situation under the section on "Home Buyer?s Rights". If you choose a lending institution which allows you a choice of settlement service providers, you should shop and compare among the providers in your area, to find the best service for the best price. Where the lender designates the use of particular firms, check with other firms to see if the lender?s sated charges are competitive.

Questions you may want to ask the lender should include these:

• Are you required to carry life or disability insurance? Must you obtain it from a particular company? (You may prefer no insurance or may wish to obtain it at a better premium rate elsewhere.) Is private mortgage insurance required? (This is insurance sometimes required bye lenders on low down-payment loans to protect the lender from excess risk.)

• Is there a late payment charge? How much? How late may your payment be before the charge is imposed? You should be aware that late payments may harm your credit rating.

• If you wish to pay off the loan in advance of maturity (for example, if you move and sell the house), must you pay a prepayment penalty? How much? If so, how long a period will apply?

• Will the lender permit assumption?

• Will the lender release you from personal liability if you loan is assumed by someone else when you sell your home?

• If you sell the home and the buyer assumes your loan, will the lender have the right to charge an assumption fee, raise the rate of interest, or require payment in full of the mortgage?

• If you have a financial emergency, will the terms of the loan include future advances clause, permitting you to borrow additional money on the mortgage after you have paid off part of the original loan?

• Will you be required to pay monies into a special reserve (escrow of impound) account to cover taxes, hazard insurance or other charges? If so, how large a deposit will be required at the settlement? The amount of reserve deposits required is limited under RESPA. Some State laws require that these accounts bear interest for the benefit of the borrower (buyer). If reserve requirements can be waived, you will be responsible for paying the particular charges for taxes or insurance directly to the tax collector or insurance company. Further information is in "Reserve Accounts" in Part Two of this information.

• What are the terms and requirements of a private conventional loan versus a loan insured through the Federal Housing Administration or Farmers Home Administration or guaranteed by the Veterans Administration? The FHA, VA and FmHA loans involve Federal ceilings on permissible charges for some settlement services, which may be of interest to you. Ask lenders about these programs. Another source of information about the federally insured or guaranteed programs is from the agencies that administer these programs.

• Can you take over the prior loan, in a transaction called "assumption"? Assumption can reduce settlement costs if the original lender agrees to transfer the mortgage to a new purchaser. An assumption can also save money over the life of the loans if the assumed loan (covering the seller?s existing mortgage) carries a lower interest rate than those currently being offered. However, in times of housing market inflation, a higher down payment might be required than if you had obtained a new loan. You may want to ask the seller whether he would be willing to "take back" a second mortgage to finance part of the difference between the assumed loan and the sales price.

Once you have selected a lender, you will probably visit its office and complete a loan application. The application will ask for information such as your place of employment, assets, liabilities, and other similar information which the lender will rely upon in judging whether you are an acceptable credit risk. Many defaults occur because homebuyers provide, either on their own or with assistance of others, incomplete or false information when applying for their mortgage loan. False application data can lead to loss of your home, an adverse credit rating, and, in the case of a Government guaranteed or insured loan, criminal prosecution bye the Government. It is important, therefore, that you Do Not:

• overstate your income;

• fail to list all debts and amounts you owe;

• make up or inflate assets;

• borrow the downpayment funds without disclosing the loan;

• provide false letters-of-credit or gift letters;

• make undisclosed financial arrangements on the side;

• accept downpayment funds from a real estate agent or broker;

• represent that you will occupy the property when, in fact, it is being purchased as an investment, or

• sign any application document that you know to be false.

• If you are applying for a mortgage loan that will be insured or guaranteed by the

Federal Government, you should be aware that there are severe penalties for fraud, intentional misrepresentation or conspiracy to influence the issuance of mortgage insurance or guarantee by the Federal Government. Providing false information on the loan application can subject you to a possible prison term and/or a fine up to $10,000. If you are aware of any fraud in a Federal Government program, you should report it to the Office of Inspector General for that particular agency.

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