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Mortgage Lenders: 10 Questions You Should Ask
You’ve done some research and have a small list of potential mortgage providers, or maybe you’ve even been pre-qualified. The next step is to start the formal mortgage application process, but before you do so, you should make sure you have all the questions you need to ask your lender ready. You can get started with your mortgage lender by asking the following 10 questions:
To begin: 1. What Are the Rate and Annual Percentage Rate?
Obtaining the actual interest rate and annual percentage rate (APR) for your loan should be your primary concern, regardless of whether or not the lender has already provided you with a quote. You can use the APR to compare loans from different lenders because it considers the interest rate in addition to any other fees or costs associated with the loan. If your lender has presented you with an adjustable interest rate, you should inquire as to the maximum rate your lender is allowed to charge, the maximum number of times per year your rate can change, and the maximum amount you can expect to pay in interest charges each year.
2- What is the Lowest Amount of Money That May Be Put Towards This Loan?
Prepayment requirements for loans might vary widely depending on the lender. A 3% down payment (e.g., $6,000 on a $200,000 loan) is possible to get with a mortgage loan if you have acceptable credit. Lenders may need a larger down payment of 20% or more if your credit is less than perfect. As the down payment is a necessary element of getting a mortgage, it’s crucial that you understand the lender’s down payment requirements before moving forward with the application process.
3-How Many Discount Points Do We Get and How Much Do Origination Fees Cost?
Paying discount points (or “points”) up front can lower your interest rate and, in turn, your monthly payments throughout the duration of your loan. If you pay more points up front, you’ll pay less interest overall. Points also have the added bonus of being tax-free. Another form of upfront payment, origination points, will cost you the same amount of money regardless of how much you borrow. Simply said, origination points are a cost paid to the lender in exchange for the time spent on approving and processing your loan.
4- How Much Will It Cost to Close?
Closing fees are often overlooked in favour of the interest rate, APR, and down payment. If your mortgage is approved by the lender, you’ll have to pay a variety of costs associated with the transaction, such as those associated with an appraisal, survey, credit checks, title policy, taxes, and recording.
5-Is There a Fee for Early Termination?
A prepayment penalty is a cost charged by some lenders if a borrower pays off all or a portion of a mortgage loan before the end of the loan’s specified term. A lender may impose a penalty if a borrower is granted a 15-year mortgage but pays it off in 10 years. Several states outlaw such fees altogether, and even in those that do, the penalties might differ greatly from one lender to the next. During the application process, you should be able to ask your lender about any prepayment fees that might be assessed. Keep in mind that penalties aren’t always hard and fast; for instance, if you choose a loan with a penalty, your lender may offer you a cheaper interest rate.
6- What Are the Requirements for Eligibility?
A borrower’s ability to repay a loan depends on their credit score, length of employment, and annual income, among other factors. First-time buyer programmes and government-backed programmes like FHA loans and VA loans tend to have more lenient standards. Jumbo loans, which are for larger amounts (often $500,000 or more), have more stringent restrictions.
7-What Kind of Proof of Identity Do I Need to Submit?
You should expect to be asked for identification documents like a driver’s licence or state ID, as well as documentation of your income like pay stubs and tax returns, as well as statements from your bank accounts and other financial accounts. The processing time for your mortgage application can be lengthened if you forget to submit a necessary document. Your application will not be processed until your lender receives the necessary paperwork from you, therefore it is crucial that you send it in a timely manner and with the correct information. The more the quantity of paperwork you submit, the greater the likelihood that you will be authorised and offered a favourable rate.
8-Can I Secure a Fixed Interest Rate?
Every day, interest rates rise and fall, so if you think they’re going higher, it’s a good idea to ask your lender if you can lock in the rate they first gave you. There may be a cost associated with locking in a rate with some lenders. Here are some questions you could ask your lender: Is there a cost involved with using their service? Is the lock simply on the interest rate, or does it include other fees as well? Furthermore, when does the key become invalid?
9- How Long Will It Take to Review My Application?
Your application could take anywhere from a few weeks to a few months to be processed and authorised by your lender. Asking how long it will take to process your mortgage application is important, but you should also inquire as to whether there are any potential issues that could delay approval of your loan. While your application is being processed, you should not make any major changes to your employment or financial situation. After all, if you’ve already provided your lender with paperwork proving that you’re employed by a specific company and making a specific amount of money, and if those facts change throughout the application process, you’ll likely need to provide new paperwork and wait for the lender to review it.
10-Do You Promise Prompt Closings?
If your lender is delayed in closing escrow, you may miss your closing date or incur additional expenses like as rescheduling your move out date or paying for a temporary rental. Ask your lender if they can commit to a certain closing date so you can make arrangements in advance. In the event that they are unable to close by the agreed upon date, some lenders will even offer compensation.