Ask if the lender or mortgage broker is licensed and bonded. This is especially important if you're doing business on the Internet or by mail. If you're dealing with a depository institution, such as a bank, thrift or credit union, it will have a federal or state regulator.

If you're dealing with a mortgage bank or brokerage, it may be licensed and bonded here in Washington, or it may be exempt from licensing and have an exemption certificate issued from the Department of Financial Institutions. If it's not licensed and doesn't have an exemption certificate, you may not have access to the protections offered by Washington law, such as a background check, bonding and a trust account.

Contact the Department of Financial Institutions (800-372-8303) to ask whether a particular company is licensed and to request information about consumer complaints the department has received.

-- Beware of lenders or brokers who don't answer your questions, who answer them with questions of their own, or who answer your questions with overly complex, overly simplistic, or dismissive answers. Making a mortgage loan is not rocket science and an honest lender or broker will respond with direct, understandable answers.

-- Don't give a lender or broker any money until you're positive you've found the deal you want. If you do otherwise, they'll frequently use this as leverage to tie you to them.

Application, disclosure and processing

-- Once you've settled on a lender or broker, you'll complete a loan application, often pay up-front third- party fees for such items as a credit report, and the lender or mortgage broker begins processing your application. Once you pay for a credit report, appraisal and title report know that they're transferable to another lender or broker if you pay a retype fee.

-- File a complete application with your lender or broker. It's illegal to do otherwise, and they'll generally discover whatever you're trying to hide. This will delay your loan, which could affect your interest rate and fees.

-- If your loan officer asks you to submit or sign false documents, this may be loan fraud and you may be committing a crime. Instead, find another loan officer.

-- Make sure you get a good-faith disclosure of the loan costs within three business days of submitting your application or giving any money to a mortgage broker. Confirm you understand what you are paying for and why.

-- Make sure you understand whether the interest rate you're quoted is locked or floating. Generally, it's floating, which means it could go up or down, and represents current market conditions. Your final rate at closing will depend upon what happens with interest rates between the time of the disclosure and the time you close the loan. The interest rate in your disclosure statement is not a commitment to deliver you a loan at that interest rate - unless you have specifically entered into, and in most cases paid for, an interest rate lock-in agreement.

-- The term "pre-approved" does not mean that you'll get a loan, are guaranteed the interest rate or costs that have been disclosed to you, or that you are locked into paying the lender or mortgage broker any of their fees. In fact, it means little at all.

-- Don't sign undated or blank forms, and make sure you understand the forms before you sign. Take time to read and understand the disclosures presented to you. Beware the loan officer who tells you that the disclosure forms are meaningless forms the government makes them complete. These disclosures are required by law to make sure you understand the transaction.

-- Remember that all fees charged by your lender or mortgage broker are usually negotiable, including so-called document preparation fees, document review fees, management fees, administration fees and loan processing fees.

-- If your lender or mortgage broker begins changing the terms of the transaction as they process the loan, begin shopping again and verify what you are being told. If interest rates are moving up, they will move up for all lenders. If your credit is suddenly a problem, and you have accurately informed the lender of your credit history in your application, ask why. Then ask other lenders if they'd also have the same problem, given the information. If you're being taken advantage of, other lenders will welcome the opportunity to offer you a lower price and attract your business.

Closing

-- Compare the costs that were disclosed to you up-front (the good-faith estimate) with those that appear in the closing documents (the settlement statement). Make sure you understand any differences. Do not sign the documents until you do understand what you are being charged and why. Beware of the lender who does not answer your questions or who is evasive.

-- Never sign blank documents. Repeat: Never sign blank documents.

-- Check for a prepayment penalty in the note (this is the document you sign that contains the terms of the loan). A prepayment penalty is generally a negotiable element of the loan, and often you can get access to a lower interest rate by agreeing to a prepayment penalty. However, if you intend to refinance or sell your property in a short time, a prepayment penalty may interfere with your plans.

-- If you have applied for a fixed-interest-rate loan, make sure you're actually getting one - and not an adjustable-rate loan sold to you as a fixed-rate loan. Again, your note should tell you whether it's fixed or adjustable.

-- If you're refinancing or obtaining a second mortgage, you may cancel your loan within three business days of signing the loan documents and be reimbursed all fees you paid. You must use the recision form provided by the lender to cancel the transaction.

-- Try to give yourself time to find alternatives. A dishonest lender or mortgage broker will use rapidly approaching deadlines as leverage against you, forcing you to accept a loan you are uncomfortable with.

And finally, if you don't understand the transaction, or feel uncomfortable about what you're being told, it is almost always better to spend the money to have an attorney review the transaction. If you're still uncomfortable, it may be better to walk away and start over, even if it means you lose a house you really wanted to buy.

Mark Thomson is director of the Division of Consumer Services in the Washington state Department of Financial Institutions. Chuck Cross is supervisor of the department's investigation and enforcement section.