Buying a home is a very significant investment so you want to take your time when signing a mortgage loan. Try completing a Home Purchase Worksheet to help you get organized first. If this is a new process for you, shop around and compare mortgage lenders.  Find out what they are willing to offer you.  If you feel pressured, walk away. 

Get started Start Your Home Purchase Worksheet Answer a few questions. We'll take care of the rest.


Once you have settled on the best lender, take the time necessary to review your loan agreement and make sure you understand the terms, such as:

  • Is it a fixed rate or variable loan?
  • Can you really afford the loan?
    • Have you been realistic about your finances?
    • Do you have enough savings in case of an emergency?
    • How is your employment situation?  Are you secure in your job (layoffs pending, etc.)?

During the loan signing process

Determine the type of loan agreement you're signing. (This is very important - get clear with your lender on this topic.  We now know very well that our economy nearly crumbled because so many people were unaware that they'd be responsible for higher payments.  This was a result of not reading their mortgage contracts clearly, or not fully preparing themselves for higher financial burden in the future.  You should even ask your lender to explain the highest payment you could be responsible for, and walk you through a worst-case scenario.) Find out if it is:  

  • A fixed rate loan, where your principal and interest rate will remain the same during the term of the loan, or
  • A variable rate loan, where you may have a low payment for a certain time, and this payment increases, based on market conditions 
  • What are the penalties for defaulting - late payment or nonpayment - on your loan?  Is there a grace period before they foreclose?
  • Check to see if your mortgage contract includes mortgage payment protection insurance.  While it can be beneficial,  you should certainly read the fine print.  The insurance will cover your monthly mortgage payments for a specified period if you suffer an accident, sickness, or unemployment.  This is only for a certain amount of time, and for a certain amount of money.  There may be a waiting period before this insurance is available to you.  However, if you had a preexisting condition or situation, you may not qualify for this insurance.  
  • Check for hidden fees: Look for the 'mortgage account fee' which lenders claim is used to cover administration costs for loans from beginning to end.
  • Are there any early repayment penalties? Are there exit fees or admin costs in addition to early repayment penalties?

Here is an example of a Home Loan Agreement in California.  Remember that every loan agreement varies, so follow the tips above to make sure you know what you're signing, and find a lawyer if you have any questions.

Get started Start Your Home Purchase Worksheet Answer a few questions. We'll take care of the rest.

Get started Start Your Home Purchase Worksheet Answer a few questions. We'll take care of the rest.