Questions Home Buyers Should Pose to Their Mortgage Lender
Without a doubt the purchase of a home is one of the largest transactions that most people take on in their lifetime. Due to the sheer size of the purchase, it is a good idea to get all the facts together beforehand. This list illustrates the information you will need from your mortgage lender before you agree to a loan.
What is the best loan for me? Most of the time a mortgage lender will be able to present you with a few options for a home loan. Comparing the APR, along with the estimated payments and the duration of the loan, should help you make the best choice.
What is my actual interest rate for the loan? Ask your lender for the APR (Annual Percentage Rate). The APR is a calculation that reflects the interest rate on the loan as well as the costs such as margin, points and certain closing items. If an Adjustable Rate is your chosen type of financing, you should ask when the loan can adjust, the maximum amount the rate can adjust each period, and the maximum amount over the life of the loan.
What will I be charged for origination? In the mortgage world, a “point” is a term used to reflect 1% of the loan amount. Therefore, if a lender charges you a 1-point origination fee, you are paying 1% of the purchase price as a cost. Each lender has different operating procedures for points charged on a loan. You need to see the amounts in writing in order to be clear on what you are paying.
May I have an estimate of the closing fees? Most lenders offer their clients a copy of a Good Faith Estimate (GFE) to any new borrower. This form lists the various costs associated with closing a mortgage.
How long will it take to process and close the loan? A mortgage may start and finish within two weeks or it might take up to two months to complete. Your lender will have the best estimate for the type of loan and the anticipated closing timeframe. Just remember one important item—an ESTIMATE is a guess based on experience. Unforeseen items can and do happen to delay the closing.
Are you locking in the interest rate? Find out if your lender intends to lock in the interest rate now or watch the market and shop around with different lenders Some lenders can lock in a rate for as long as 60 days, but there may be a fee associated with it.
Taking out a mortgage is akin to a high-stakes business transaction. The party with the most facts and details usually walks away with the best deal. Take the time to do your homework and make sure you understand every step along the way to owning your home.