When you’re getting ready to shop for a mortgage broker or lender, you are preparing to make a huge financial commitment. Things can go as expected, but in some cases, there are may be significant fees that aren’t spelled out. Some lenders may even try to sell you on a different type of loan that could lead you into years of financial challenges.
1. What Loan Is Best For Me?
Any good, reputable broker is going to want to know more about you before they start loaning you large sums of money. You wouldn’t expect a medical diagnosis without any testing, your mortgage should be no different.
2. What Is The Interest Rate AND The Annual Percentage Rate?
Many brokers will calculate the APR slightly differently, and there is no APR for adjustable-rate loans. Be sure you have all info needed about your loan.
3. What Size Down Payment Do You Need?
Most sources will recommend about 20%, but that is not always needed. If you have good credit, you may be able to get a loan with less than 5% down. Lenders tend to increase closing costs and monthly payments with lower down payments.
4. Are There Discount Pints Or Origination Fees?
Discount points are tax-deductible, but each cost 1% of the total loan amount. Some lenders also charge origination fees for processing your loan application.
5. What Are The Total Costs?
Ask about the total costs. From the broker fees to any other fees that may be charged by a third-party. This can be appraisals, credit pulls, inspections, escrow, and more. There should be a legally required copy of the Loan Estimate that is given to you, which will include this information.
6. Are Fixed-Rate Loans Available?
Interest rates change daily depending on the Fed. This means that if you can get a loan with the interest rate locked in, it could mean saving thousands over other loan terms. Ask about fees though, some lenders charge for fixed-rates.
7. Are There Prepayment Penalties?
In some states, these penalties are not even permitted, therefore it’s very important to ask. Some penalties force the buyer to pay additional interest if you pay off early. Ask how long the financing offer was on the table.
8. Do You Do In-House Approvals?
Most loans need an underwriter’s approval, which can be dependant on conditions. If your lender does its own underwriting, that means your loan may be processed quicker. VA and FHA loans are known for taking longer.
9. How Long Is Needed To Fund The Loan?
In many cases, the time to fund a loan is around 40-45 days. You will have a closing date, so things will need to be coordinated. Inquire about the usual turnaround time, and if there is anything that can delay closing.
10. Are There Any Guarantees For On-Time Closings?
Closing can be stressful, and many contracts will include a date to close escrow by. This is usually subject to the ability of the lender to close on-time.