Planning to buy a home in the near future? Keep an eye on the financial reform bill, which should go to a vote by the House and Senate next week.

After a marathon wrangling session, Congressional negotiators agreed on early Friday to legislation that will impact a wide range of financial services and transactions, including some important mortgage-related provisions. Consumer advocates heralded the proposed bill, while the Mortgage Bankers Association released a statement saying it it could have been much worse.

Here s a look at what s on the table.

Compensation for loan originators

One of the key provisions in the legislation deals with how mortgage brokers and loan originators are paid. The bill would prohibit lenders from paying brokers more for steering borrowers to more expensive loans. Loan originators have often been given financial incentives to put borrowers in loans with higher interest rates than they qualify for.

If someone qualifies for a lower-rate loan, then they ought to get that. And it would be illegal for lenders to steer people to higher-priced, riskier loans, says Ruth Susswein, deputy director of national priorities at Consumer Action, an advocacy group.

Prepayment penalties

The bill also restricts mortgage prepayment penalties, which are penalties charged to a borrower who repays the loan earlier than originally agreed upon. (In the past, when homeowners tried to refinance into a cheaper loan, they faced heavy penalties and increased payments.)

Adjustable-rate loans, subprime loans or other loans with other risky characteristics won t be able to include a prepayment penalty. For more traditional fixed-rate loans, the prepayment penalty will be limited to a maximum of three years and a maximum of 3% (of the outstanding loan balance), says Julia Gordon, senior policy counsel at the Center for Responsible Lending.

Ability to repay

The legislation blocks lenders from making loans without verifying if the borrowers can repay them. In an attempt to banish the practice of no doc and liar loans, the bill will require lenders to document income and have a reasonable belief that borrowers can repay their loans.

It might seem absurd that such a thing would have to be put into law now, says Susswein. After all, no-doc loans are hardly issued anymore. But as we see the market continue to get healthier, people in and out of the industry will have very short memories -- until we re in crisis again, she says. The Senate s provision requires a mortgage originator to ensure a borrower s ability to repay the entire loan based on verified income documentation.

Appraisals

The bill would grant the consumer protection bureau authority over home appraisals and the power to ensure the independence of appraisers from lenders and realtors. Currently, the Home Valuation Code of Conduct (HVCC), which was mandated last year by Fannie Mae and Freddie Mac, has this role. HVCC requires lenders to keep a distance between the lenders and appraisers. Most lenders have chosen to outsource appraiser selection to third-party appraisal management companies (AMCs). But this practice has resulted in some cases of AMCs steering work to appraisers who cost the least, not those who are most qualified.

HVCC is scheduled to sunset in November. The legislation calls for a new committee to be set up to review and set in place new standards for appraisal independence.

Credit score

The bill would give consumers free access to their credit scores when they re denied a loan, rejected for a job, or charged a higher interest rate based on their credit history.

Today, the credit score is the chief gauge used by lenders in deciding whether to approve a loan. Right now, consumers can only access their credit report for free once a year (through AnnualCreditReport.com); they must pay to see a credit score from one of the three credit reporting bureaus. So if your mortgage application gets turned down, the lender would have to provide the credit score information they used to make the decision.

This article was updated on June 25, 2010.