1. What is the interest rate? One of the most important costs associated with a mortgage is the interest rate. You will need to know exactly what you will be paying over the life of the mortgage. Interest rates change on a daily basis. If you have less than perfect credit, you may find that interest rates are higher for you than the lender advertises. To compare different lenders and mortgage programs, you should ask for the annual percentage rate (APR) of the mortgage. This amount is usually higher than the initial quoted rate because it includes fees. The APR in advertisements is often misleading. Mortgage lenders often omit certain fees, leading to a lower advertised APR. If you use the advertised APR to compare lenders, instead of an itemized breakdown of rates, points and fees, you may not be comparing the same types of mortgages to each other. 2. What are the discount and origination points on the mortgage? Lenders may charge prepaid mortgage interest points in order to lower your interest rate. Some charge origination points that are no benefit to you. Find out how many points you will have to pay to get the quoted interest rate and what type of points they are. 3. What are the closing costs for the mortgage? There are many fees associated with mortgages. These are for the various services provided by the lender and other parties involved in the purchasing process. You will need to know what these fees are as soon as possible. Lenders are required by law to provide you with a written good faith estimate of closing costs within three days of receiving your loan application. 4. Can you lock in an interest rate and what will it cost? Interest rates are constantly changing. There is a chance that your interest rate will fluctuate between the time you apply and the time you close on the transaction. If you want to be certain that the rate will not go up, you will need to lock the rate in for a specific period of time. Ask the lender what it costs to lock in an interest rate. Take the time to see if rates are expected to go up or down before you lock in your rates. If they do go down on the overall market, make sure that you point it out to your lender. 5. Is there a prepayment penalty? Most mortgages dont have prepayment penalties. But if you are looking at a sub-prime mortgage, there is a chance there will be a prepayment penalty written into your mortgage. Some lenders will give you a lower interest rate if you accept a prepayment penalty in the mortgage agreement. The penalty may range from 1% of the mortgage amount to six months of interest, or may be calculated using different methods. Some penalties only apply when you refinance or reduce the principal balance by more than 20%. Others are charged if you sell your home. Find out what the penalty is, how long it can be enforced and how it is calculated. 6. What is the minimum down payment? Down payments are typically between 3% and 20% of the homes purchase price. The interest rate and terms of your mortgage will be based on how much you put down. If you can put more money down, you will see a lower rate and better terms. If you arent able to put very much down, you may have a higher interest rate and be required to pay Private Mortgage Insurance (PMI). 7. What are the guidelines to qualify for this mortgage? The guidelines are the requirements that your income, employment, assets and debts and credit history must meet to be approved by the lender and underwriters. Many special programs, such as VA loans or first-time homebuyer programs, have easier qualifying guidelines than conventional mortgages 8. What paperwork do I need to provide? Most lenders require proof of income and assets before they will approve you for a mortgage. Many lenders require other documents as well. Buyers with excellent credit may be able to avoid providing income documentation, but they will need to pay a large down payment and higher interest rate. These no-documentation mortgages are often used by the self-employed or small business owners. 9. How long does it take to process a loan application? There are a lot of little details that must come together in approving a loan application. If the lender is busy, the underwriters are backed up or the appraisal is slow in coming, you may be waiting for a while. Lenders often say two weeks, but many potential homebuyers will wait 45 to 60 days for approval. Ask for their best guess so you know how long you will need to lock your interest rate in for. 10. What would delay the approval of my loan? You want to avoid any delays in the approval process. You can do this by providing the lender with complete and accurate information. If the underwriter discovers credit problems you did not disclose, you could be delayed for quite a while. If you change jobs, increase or decrease your salary, incur additional debt or change your marital status you will need to notify the lender. This will prevent any last minute questions and delays. Make sure that you ask these ten questions to each lender that you are considering. Compare the answers and pick the mortgage lender that is right for you.
Posted on: Thu, 11 Dec 2014 19:08:44 +0000
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