Why use a loan shopping checklist?

Using a loan shopping checklist puts you in the driver’s seat. Borrowers who prepare and compare offers routinely save hundreds to thousands of dollars over the life of a loan by: reducing interest costs, avoiding unnecessary fees, and selecting repayment terms that match cash flow. In my practice advising borrowers, the single biggest difference between a good loan outcome and a bad one has been preparation: gathering documents, knowing the right questions, and comparing apples-to-apples (rate + fees + term) across multiple lenders.

Quick checklist you can use today

  • Gather documentation: pay stubs, W-2s, recent bank statements, tax returns (last 2 years), and proof of assets. Lenders will want to verify income and reserves.
  • Know your credit profile: pull your credit reports and scores from AnnualCreditReport.gov and a vendor like FICO to see where you stand.
  • Calculate your debt-to-income (DTI): total monthly debt ÷ gross monthly income. Lenders use DTI to judge ability to repay—know your number before applying (see our guide on debt-to-income).
  • Shop at least three lenders: compare interest rate, APR, fees, and repayment terms.
  • Ask for written estimates: for mortgages request a Loan Estimate; for other loan types ask for a written breakdown of fees and APR.
  • Check prepayment penalties and late fees: will extra payments reduce your principal without penalty?
  • Confirm whether the rate is fixed or variable, and if variable, what index and caps apply.
  • Understand collateral requirements: is the loan secured (home, car) or unsecured?
  • Verify origination timing and rate locks: how long can you lock a rate and what happens if rates move?
  • Ask how many credit pulls they will perform and whether those pulls will affect your credit score.

(Internal resource: Our explainer on How Debt-to-Income (DTI) Affects Mortgage Approval explains how lenders use DTI and how to calculate yours: https://finhelp.io/glossary/how-debt-to-income-dti-affects-mortgage-approval/.)

Detailed questions to include on every lender call or application

Interest and cost-related

  • What is the interest rate and is it fixed or variable? If variable, what is the index and margin?
  • What is the APR (annual percentage rate)? APR incorporates many fees and is the best single number for cost comparison.
  • What fees are charged upfront and over the life of the loan? Ask about origination, underwriting, processing, application, appraisal, title, or closing fees.
  • Are there prepayment penalties or balloon payments?

Terms and repayment

  • What is the loan term (months/years) and the monthly payment schedule?
  • Is there a grace period for missed payments and what are late fee policies?
  • Are there options to change payment dates, make biweekly payments, or recast the loan?

Lender practices and timing

  • How many credit checks will you perform and which credit bureau(s) do you use? (FICO generally treats multiple mortgage or auto inquiries in a 45-day window as a single inquiry for scoring; confirm with the lender and your scoring model.)
  • How long is the rate lock? Is there a fee to lock or extend a lock?
  • What documentation is required and how long does approval typically take?
  • Do you service the loan or sell it to another servicer after closing?

Eligibility and underwriting

  • What minimum credit score, income, and DTI are required?
  • Are non-traditional income sources (gig income, rental income) acceptable, and how must they be documented? (See our piece on nontraditional income documentation.)

How to compare offers: beyond the headline rate

  • Compare APRs not just nominal rates. APR includes many fees and gives a truer cost-per-year comparison across loans with different fee structures.
  • Build a three-year and full-term cost projection: some loans have lower initial rates but higher long-term costs.
  • For mortgages, ask for a Loan Estimate (LE) and Closing Disclosure (CD). The LE standardizes key terms so you can compare across lenders reliably (Consumer Financial Protection Bureau guidance).
  • Use monthly payment and total-interest calculators to model scenarios: change the term, add extra payments, or test various rates.

Practical tips for protecting your credit score

  • Time your credit pulls: when rate-shopping, try to do all mortgage or auto lender pulls within the shortest possible window. FICO’s rate-shopping window is commonly 45 days for these loan types; other scoring models may use 14 days.
  • Get prequalification vs preapproval definitions in writing: prequalification is usually a soft inquiry and an estimate; preapproval is typically a conditional offer after document review and a hard inquiry.

Red flags to watch for

  • Vague fee descriptions or rates that are not in writing.
  • Pressure to sign quickly or to accept a rate/term without time to compare.
  • Refusal to provide a Loan Estimate (for mortgages) or written fee schedule.
  • Guaranteed rates or promises that sound too good without proof.

Examples and short case studies

1) Mortgage shopper
A homebuyer compared three lenders and requested Loan Estimates from each. Lender A had a low advertised rate but higher origination and discount points; Lender B had a slightly higher rate but lower fees and no prepayment penalty. When the buyer compared APR and modeled 30-year cost, Lender B saved more over 5 and 30 years. Using our mortgage points guide helped them decide whether buying points made sense (see Mortgage Points vs Credits: When Buying Down Your Rate Makes Sense: https://finhelp.io/glossary/mortgage-points-vs-credits-when-buying-down-your-rate-makes-sense/).

2) Student loan consolidation
A recent grad used the checklist to gather all student loan balances and proof of interest rates, then asked potential lenders about repayment flexibility and deferment options. She chose a consolidation loan with a modestly lower rate and no prepayment penalty.

What phone scripts and email templates should you use?

When you contact a lender, use concise scripts:

  • “I’m comparing loan options and would like a written estimate with rate, APR, all fees, and any prepayment penalties. Will you provide that?”
  • “If I apply, how many credit bureau inquiries will you perform and how will that affect my credit score?”
  • “Do you service the loan after closing or sell it? If sold, who typically services these loans?”

Save all written estimates and compare them side-by-side in a spreadsheet with columns for rate, APR, fees, term, monthly payment, prepayment penalty, and service/ownership.

Common mistakes borrowers make

  • Comparing only interest rates and ignoring APR/fees.
  • Applying to many lenders without rate-shopping strategy, causing multiple hard inquiries outside the shopping window.
  • Not asking whether the lender will sell the loan—different servicers can affect how payments are handled and where to send disputes.

Professional checklist (printable)

  1. Collect ID, proof of income, bank statements, tax returns.
  2. Pull credit reports from AnnualCreditReport.gov and check for errors.
  3. Calculate DTI and target monthly payment range.
  4. Contact 3+ lenders: request written estimates and ask the questions above.
  5. Compare APRs, fees, and prepayment terms; run cost models for 3, 5, and full-term horizons.
  6. Choose the lender with the best combination of cost, service, and transparency.
  7. Keep copies of all disclosures, your signed contract, and servicing information.

Helpful internal resources

Authoritative sources and further reading

  • Consumer Financial Protection Bureau (CFPB): guidance on Loan Estimates, Closing Disclosures, and mortgage shopping.
  • FICO: information on how multiple credit inquiries for rate shopping are treated by credit scoring models.
  • Federal Trade Commission (FTC): consumer protection resources when dealing with lenders.

Professional disclaimer

This article is educational and not personalized financial advice. Loan terms and requirements vary by lender and product. Consult a licensed financial advisor or mortgage professional for guidance tailored to your situation.