Home Loans

AARP's Borrower's Guide gives you information that can help you get the best possible loan and avoid bad, or predatory, loans. You'll find worksheets, a glossary of terms, and information about:

• Getting the best loan possible;
• Identifying the warning signs of a bad loan;
• Comparing home equity lenders;
• Using reverse mortgages as an alternative to home equity loans;
• Making home improvements: contractors and contracts;
• Getting bids and selecting a home contractor; and
• Examining the home improvement contract.

People borrow on their homes for many reasons-to make repairs or improvements, to consolidate debts, to pay off medical bills, or something else. Sometimes there may be benefits to using your home equity when you borrow. But if the loan costs too much, the benefits disappear ... and so might your home.

Predatory home mortgage lenders look for people who may have financial difficulty. They hunt for people who may be behind on property taxes, who need to fix up their home, or who need money for medical bills. Once they find these people, the lenders often use highpressure sales talk, high interest rates, outrageous fees, and repayment terms that the person can't afford. Fast talkers can trick homeowners into taking out loans that they can't afford to pay back. When they can't make the payments, their homes are at risk of foreclosure.

Even if you don't have financial troubles, no one wants to pay more than is needed. Why pay interest rates higher than you need to? Why pay unneeded fees or charges? Whether you have excellent credit or not-sogood credit, you want the best possible loan you can get.

Don't be fooled by loan offers you see on television or receive in the mail. They don't tell the full story.

Be a smart borrower. Don't get caught in a bad loan!

Follow these steps: Know your credit rating and credit score.
Sometimes people who have good credit are charged higher rates and fees for loans because they don't know that their credit is good. Getting your credit report and credit score may help you negotiate the best loan for you so you don't pay more than you should have to pay. You'll want to look for any mistakes in your credit report and take steps to correct them. You can get your credit score on the Internet, usually for a fee, or a lender can give you a free copy when you apply for a loan. Avoid lenders who won't give your score to you. Most credit scores range from 300-850, and the higher the score, the better your credit. Most lenders consider scores over 700 as "good" to "excellent" scores.

The three major credit reporting agencies are:

• Equifax: (800) 685-1111, www.equifax.com;
• Experian: (888) 397-3742, www.experian.com; and
• TransUnion: (800) 916-8800, www.transunion.com.