10 Important Questions To Ask When Applying For A Mortgage
First and foremost, it’s important to narrow down your list of mortgage lenders… once this has been completed it’s time to start comparing what they can offer you.
Here are 10 key questions we recommend that you ask when it comes to applying for a mortgage. These won’t ensure the best mortgage loan you can dream of, but these will help and ensure that you are getting the best deal out there. If you have already chosen your lender and are getting ready to apply (we hope it’s with us), then make sure that you have an answer for these next questions, or at least have an idea of the answer…
It’s important to determine exactly what you will be paying over the term of the loan; this requires you to know the rate. Rates are prone to changing quickly, and if your credit is less than to be desired, you might not be offered the lender’s lowest available figure.
To efficiently compare different mortgage lenders’ programs, ask for their APR or annual percentage rate, of the mortgage interest. This tends to be higher than the initial quoted rate, this is due to the fact that it includes all of the lender’s fees. But be cautioned: the APR found in advertisements can oftentimes be misleading and provide false information. Some mortgage lenders don’t include all of the fees that they charge in their calculation that determines the APR. This is why it is extremely important to itemize everything when shopping for a mortgage loan.
Lenders could possibly charge prepaid mortgage interest points, this is to lower your interest rate or other points that have no advantage to you at all. So make sure to find out how many discount and origination points you will be expected to pay and what they are in detail.
Most lenders provide a hand-written good faith estimate of your closing costs; this should be done within three days of receiving a loan application. If a lender does not provide this, many experts would say to avoid these types of lenders and brokers.
It’s a known fact that mortgages come with fees, and these are because of various services provided by the mortgage lender and possibly other parties that are involved in the transaction. To stay ahead of the game, it’s important to know what these fees will be as soon as possible.
Keep in mind that your interest rate will most likely change/fluctuate from the time you apply to the time you close. To avoid the interest rate going up, it might be a smart idea to lock in the rate, maybe even points, for a specified period. This is where you would ask your lender if lock-in fees are applicable. It also wouldn’t hurt to keep an eye on the current interest rates.
It is possible. Some penalties are 1% of the loan amount, while others are equal to 6 months’ interest. Other prepayment penalties apply when refinancing or reducing the principal balance by more than 20%, and some could kick in when you go to sell your house. Find out the duration of these penalties and how it is calculated.
The terms and rate of your loan is based on the down payment figure, this can be 5 to 20 percent of your purchase price. If you are able to put more money down, it might be possible to lower your rate and improve your terms. If coming up short is an issue, look into purchasing a private mortgage insurance (PMI).
The qualifying guidelines relate to your income, employment, assets, liabilities and credit history. For first-time homebuyers, VA loans and other government-sponsored mortgage programs there are easier qualifying guidelines.
A typical lender requires proof of income and assets before approving a loan, and they also may require other documents. This completely depends on the lender. If you happen to have a high credit score, you may qualify for a no-documentation loan, but expect a steep down payment and high interest rates.
This particular answer will depend on a varying amount of things. When things are busy, people tend to get backed up and verification takes longer, and appraisals move slower. Ask your lender for their best guess on the situation.
If the lender is provided with complete and accurate information, everything should go rather smoothly. If credit problems arise, there could be delays. Make sure to notify your mortgage lender if you have a change of occupation, your salary increases/decreases, or marital status has been changed while the loan process is taking place.
Use these ten questions as your pursue your quest for the right mortgage lender. If they can’t seem to answer one of these questions, then you might have to reconsider.