Before you apply.

A lender should be happy to talk with you about all the loan products they have available, and what is needed to get the loans.  Unless it is clear from talking with you that you could not get any of their loans (for example, you may not have enough money for a down payment), a lender should be helpful and should encourage you.  A lender should give you information about how to apply for a loan, and what to bring with you when you come.

Some general information about lending.

Banks, mortgage companies, credit unions, savings and loans - all make mortgage loans.  And they all have the same goal - to lend money to people who are going to pay it back on time.  They will all require proof of enough income and a history of paying your bills, to that they can know if you are a good risk.  They will need proof that the house you are buying is worth what you are paying for it.  But they should be able to tell you exactly what their standards are.  The most important are:

• The percentage comparing your monthly income to the size of the monthly mortgage payment, including taxes and insurance (PITI).  This is called the "front end ratio."
• The percentage comparing your monthly income to all your monthly debt, including the mortage payment.  This is called the "back end ratio."
• What a reasonable credit history is.
• How much money is required for closing and how much they want you to have left over. 

Each institution may offer many different loan "products," with different requirements (such as how big a down payment you will have to make) for each one.  "Conventional" loans usually have a lower rate, but you need a larger down payment.  Government-insured loans, such as FHA or VA loans, cost more over the long run, but may require only a very small down payment.

Filling out the loan application.

A lender will ask you for a lot of information and documentation about your finances.  Be prepared.

You will also have to decide what kind of loan to apply for.  A lender should give you enough information to decide this for yourself.  If a loan officer without asking you, decides you want one kind of loan (such as an FHA loan), there may be a problem with your lender.

The loan officer should help you fill out the application.  The loan officer should ask you questions to help you remember things that may help you (like having savings bonds or other assets).  The loan officer should also ask you questions so you can explain things that might be problems (like slow payments on your credit history).  If you have too many debts to qualify, the loan officer should find out when they will be paid off - short term debt should not be counted.

You wait.  Loan processing is never quick.  If interest rates are really low and the lender is very busy, it can take even longer.  But unless there are problems, you should hear something in 3-6 weeks.  During this time, the lender may ask you for more information.  If this happens, give it, but keep a record of what you were asked for, and when.  Also, when you give this extra information, send it with a letter.  The letter should say what extra information you are giving, why you are giving it, and when.  For example, you could say:  "As you requested in your [date] letter, enclosed is a copy of my tax forms for 1995."

Find out why you were turned down.  Write down everything you are told and who told you.  Make sure you get a copy of your "adverse action" letter.  By law the lender must send it to you within 20 days of the denial.  The letter must give all the reasons why you were turned down.  If credit is the problem, get a copy of your credit report.  If the appraisal came in too low, get a copy of the report.  The law requires the lender to give it to you, if you ask for it in writing.

There are many valid reasons to turn someone down for a loan.  These include poor credit, not enough income, or too many debts.  Not every denial or delay of a loan application is discrimination.  But be concerned if:  you think your credit is good; you can explain a past credit problem; or if you are denied a loan for any OTHER reason than your income, debts, or credit history.

It is against the law for someone to deny you a loan to buy, repair or refinance a house - or to charge you more - because of your race, color, religion, national origin, sex, disability or family status.  These are some things that might be illegal discrimination:

• Lenders who discourage you from even apply, no matter how nicely they put it.
• Negative statements or a denial just on the neighborhood, not the value of a house.
• A lender who decides you want one kind of loan, such as an FHA loan, before seeing your qualifications.
• A lender who does not help you make your best case when applying for a loan.
• Long delays and repeated requests for more information.
• Changes in the terms and conditions of the loan, such as raising the interest rate, asking you for a larger down payment, or changing a 30 year loan to a 20 year loan.
• A refusal to make loans under a certain amount, such as the cost of your house.
• A low appraisal that talks about the neighborhood, or the age of the house.

Take notes.

Try to get everything in writing.  Call the Greater New Orleans Fair Housing Action Center (FHAC).  FHAC will investigate the problem.  FHAC may send testers - people who pretend to want a loan - to the lending institution to see is everyone is treated the same way.  FHAC will go over your qualifications and finances to see what the problem might be.  FHAC will explain how the law protects you and what you can do, and make sure you are treated fairly. 

If discrimination is proven.

Every situation is different.  But here are some possible results:

• You may get a loan at a favorable rate.
• You may be paid for the extra money you had to spend because of the discrimination.
• You may be paid for the pain, suffering, and humiliation you and your family felt because of the discrimination.
• The lender may be forced to have fair lending training and to change the way it does business.
• The lender may have to make a special effort to make loans to the type of people who were illegally denied loans.