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Important Update: Changes in FDIC Deposit Insurance Coverage

The FDIC deposit insurance rules have undergone a series of changes starting in the fall of 2008. As a result, certain previously published information related to FDIC insurance coverage may not reflect the current rules. For details about the changes, visit Changes in FDIC Deposit Insurance Coverage. For more information about FDIC insurance, go to www.fdic.gov/deposit/deposits/index.html or call toll-free 1-877-ASK-FDIC (1-877-275-3342). For the hearing-impaired, the number is 1-800-925-4618.

Special 10th Anniversary Edition - Fall 2003

Questions to Ask Before Signing a Contract on a Home Loan

What is the APR — the annual percentage rate? Is this the lowest rate you can offer?
The APR is the total cost of the loan, including interest charges and other fees, expressed as a yearly rate. Comparison shop among several lenders so you have a good sense of the costs you should be incurring, then negotiate the best possible terms.

What "points" and fees would I be charged?
Are any of these charges being added to the loan balance and increasing my payments? Each point equals one percent of the loan amount. Make sure you have a good understanding of all costs and conditions.

Does the loan include fees for credit protection that would cover the loan payment if I die, become ill or unemployed?
Most credit protection is optional. Determine if you already have adequate insurance or savings to cover these events. If you need additional coverage, consider your options and costs.

Is there a prepayment penalty if I pay off the loan early by refinancing or selling my house?
If so, is that stated in the documents? A loan with a prepayment penalty may have a lower interest rate than the same loan without a prepayment penalty, but the penalty can limit your flexibility to refinance or otherwise pay off the loan. Try to determine what is appropriate for your circumstances.

Do any of the loan terms differ from what was previously discussed or provided?
Review documents prior to signing them and make sure you understand why any changes in terms and conditions have been made and that you agree with them.

What will my monthly payment be?
What would cause the payment to change? Just because a lender says you qualify for a certain loan amount doesn't mean you are getting a loan that is affordable for you.

Is there a "balloon" payment?
If so, when is it due, and how much will I owe? A balloon payment is a large, lump-sum payment due at the end of the loan term.

Excerpted from "Questions to Ask Before Signing a Loan Contract," Summer 2002.

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Last Updated 12/12/2003 communications@fdic.gov