Which Questions Should I Ask?
1. What Is The Interest Rate And Annual Percentage Rate Of The Loan
Find out what the interest rate will be on the loan as well as the annual percentage rate (APR). The APR is a combination of the interest rate, points and other charges divided by the loan’s term to give an annualized rate. It is the best way to properly compare loan costs.
2. How Many Points Will Be Charged?
A point is one percent of the loan amount. Points charged are additional to the interest rate that is charged on the loan. A loan with a low interest rate and high points may cost you thousands more than one with a higher interest rate but low points. This is important because the number of points charged varies from lender to lender. In today’s market points are rarely charged, except at the request of the borrower when choosing certain programs.
3. What Will The Total Closing Cost Fees Charged Be?
Lenders charge fees for the services incurred to process and close your mortgage. By law, closing costs must be disclosed within 3 days of the loan application, however, there are different approaches to calculating them. Some brokers will initially disclose closing cost figures which are very appealing, only to provide much higher costs as your closing date approaches.
4. Is There a “Lock-In” Policy?
Many lenders offer a lock-in policy that guarantees you a certain interest rate and points for a specified number of days. The alternative to this is accepting the prevailing rate and points on your closing day since rates can change daily, the one time lock-in fee may be able to save you thousands.
5. How Long Does It Take To Process My Mortgage?
Processing is the means by which your loan is prepared for underwriting or approval. The time it takes to process a loan varies by the type of loan and even among lenders. Loans can usually be funded within 7 to 10 working days. If time is of the essence, a lender with quick processing, underwriting and funding capabilities can prove to be a very valuable asset.
6. Are You a VA Automatic or FHA Direct Endorsement Lender?
VA automatic and FHA direct endorsement means that a lender has met all the government requirements for FHA/VA and the lender’s underwriter has completed mandatory education requirements. An automatic or direct endorsement lender can approve or disapprove a loan just as if the loan had been sent directly to the regional FHA or VA office.
7. Can I Finance The Private Mortgage Insurance Premium Into The Loan Amount?
If your down payment is less than twenty percent of the sale price, to qualify, you will be charged PMI, an insurance premium to protect the lender in case you or someone else who assumes your loan defaults on the loan. Some lenders allow you to include the first year’s premium into the amount of the loan. Including this premium may be the difference when getting a mortgage by reducing your cash outlay.
8. Is There a Pre-Payment Penalty?
Normally you can prepay a loan without penalty if you notify the lender in writing that you are either selling or refinancing. There are exceptions though. Make sure to ask about your mortgage and have it configured for your unique situation. Prepayment penalties are illegal in New Jersey.
9. What Is The Lender’s Track Record?
It’s important to rate your lender’s reputation for speedy processing, knowledgeable loan service and meeting contract deadlines. You want to hire a mortgage broker who will treat you the way you want to be treated and has respect for your purchase. Your lender will be dealing with your hard earned money and home purchase, so you want to be confident that you have made the correct decisions.
10. What Do You Offer To The First Time Buyer?
Purchasing a home is among the most significant financial commitments most people will ever make. First time buyers often have special needs and concerns Make sure that your broker provides services especially tailored for the first time buyer.