Whether you are looking to finance a new house or refinance the one you're already in, you can protect yourself from being overcharged by following this list of "dos and don'ts" from the National Mortgage Complaint Center, a for-profit company which inspects loan documents for unnecessary and duplicative lender fees prior to closing.

Do:

Check out any lender with whom you are considering doing business. Check with your local better business bureau, consumer affairs agency and the state agency which supervises the mortgage business. Find out if any complaints have been lodged against them, the nature of the complaints and how they were resolved.

Ask each lender to give you a quote that includes not only the interest rate but also all the fees associated with the mortgage. And make the request before allowing them to run your credit report. You should be honest about how good or bad your credit history is, but you should not have to pay for a credit report or anything else in advance of obtaining a quote and actually making a formal application for a mortgage.

Remind the lender that he is required by law to provide a Truth in Lending statement and a Good Faith Estimate of your closing costs within three days of applying for the loan. Don't just remind the lender, though, but also inform him that you expect him to comply with these federal regulations. No excuses.

Confirm in writing whether you will be paying the broker twice, once in the form of an origination fee and again in the form of a "yield spread premium." YSPs are back-end fees which are paid by the funding lender to the broker for landing customers willing to pay a higher interest rate.

There are reasons why a borrower might be willing to pay more. You might want to roll the closing costs into the loan amount, for example, or you might want to borrow more than the house is actually worth. But you also have a right to know if the broker is double-dipping. According to Thomas Martin, president of the National Mortgage Complaint Center, "yield spread premiums are the number one source of overcharges in the mortgage industry."

Also confirm whether or not the loan you are seeking comes with a prepayment penalty for paying off the mortgage early, typically within the first three years.

If the lender is unwilling to make either of these two disclosures in writing, Martin strongly suggests that you "find another mortgage lender."

Have NMCC or some other reliable but also independent third party review the loan documents for possible overcharges or unjustified fees. The complaint center charges $45 for a narrative report detailing the fees it finds excessive.

Don't:

Do not be swayed by slick TV and radio ads. Some may be from legitimate lenders, but many are from companies which act as nothing more than middlemen who charge lenders for sending them "leads." Do your own homework.

According to Martin, "These middlemen frequently get huge fees for sending the borrower to the most expensive lenders, with the net result being, you end up paying more money."

Do not be fooled by offers that sound too good to be true. If it sounds too good to be true, it usually isn't true at all.

Do not sign any papers in which the blanks are not completely filled in or crossed out. And don't be talked into fibbing on your loan application by someone who says "everybody does it." It is illegal to falsify loan documents.

Don't go with the builder's in-house lender just because it is convenient to do so. Compare what the builder is offering to the rates and fees other lenders charge. His may or may not be the best deal, and sometimes the builder will sweeten the pot to gain control over the entire transaction.

But remember, builders who also act as lenders are earning the same fees -- or maybe higher fees -- that other lenders charge. Martin, who has reviewed thousands of transactions on behalf of borrowers, says some of the highest charges he's seen come from builders acting as mortgage brokers.

Do not allow yourself to be forced into closing the loan if you don't understand all the terms or if the terms don't match what you were told in the beginning. Give yourself some leeway – at least several days – between closing on the mortgage and moving into the new house so that if something isn't satisfactory, you won't be stuck with a loaded moving van and a car full of screaming kids waiting to get into their new digs.

Realize that both the lender and the seller have just as much incentive to close as you do. So if something isn't right, stick to your guns. Make one of them flinch first.

Published: December 14, 2005

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.