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Having a list of mortgage questions to ask potential lenders is just the start. Knowing the answers you’re looking for puts you ahead of the game.
This question will help you determine whether you’re talking to just a producer — a salesperson — or a quality adviser. When you ask, "What are my options?" for each type of loan discussed, the mortgage lender should tell you the pros and the cons in light of your situation.
A 20% down payment is every lender’s ideal, but it’s not always required. Qualified buyers can find, or even no down payment. Again, there are considerations for every. The best lenders will take the time to walk you through the choices.
If you really want to size up your mortgage lender’s value, this is the question that will do it. If you get a chuckle or a groan in response, move on.
Lenders with knowledge of local, state and national — and the wherewithal to help you navigate the process — are well worth the hunt.
You probably already planned to ask this mortgage question. It’s the one benchmark we all understand. Or do we? Lenders can move the needle on your a number of ways, most of them involving additional fees.
But after talking to at least a couple of lenders, you’ll get an idea of a ballpark interest rate you’ll qualify for. Let’s say it’s 5%. We’ll call that your payment interest rate because that’s what your monthly mortgage payment will be based on.
Knowing that, you’ll move on to the next — and very important — question, about the annual percentage rate, or APR.
By the way, if you’re considering an rather than a fixed-rate loan, you’ll want to ask: How often is the payment interest rate adjusted? What is the maximum annual adjustment? What is the highest cap on the rate?
Now that you have an idea of what your payment rate will be, it’s time to find out what your is. The difference between the two? The APR incorporates all of the embedded fees of the loan.
Ask your lender if any are included in your APR. The answer you're looking for is "No." You can always decide later to buy discount points, which are extra fees you pay upfront to lower your interest rate.
When you have zero-discount-point APRs from competing lenders, you can see who has the lowest fees for the same payment rate.
In our example of receiving a 5% payment rate, you’re looking for the lowest APR based on that payment rate. Maybe one lender offers you a 5.25% APR, and another a 5.5% APR. The 5.25% APR lender is charging you fewer fees.
A higher APR isn't always a bad thing.
Say you’re buying your "." If you buy discount points to lower your payment rate, you’ll have a higher APR. But after some years, you’ll make up for the additional fees by paying less in interest thanks to that lower payment rate.
It’s always good to know when the lender is going to perform a "hard" credit check, called a "." That type of payment history inquiry shows up on your credit report. Lenders need to do this to give you a firm interest rate quote.
When you’re shopping more than one lender, you’ll want these hard credit pulls to occur within a short period of time — say within just a week or so — to minimize the impact on your credit score.
Once you've decided on a lender, you may want to lock in your interest rate at some point. This ensures that it doesn’t go up — though it won't go down, either.
The answer you’re looking for on a typical home loan (not a construction loan) is: There’s no charge for an interest.
If you put down less than 20%, the answer will probably be "Yes."
Even if the is "lender paid," it’s likely passed on as a cost built into your mortgage payment, which increases your rate and monthly payment. You’ll want to know just how much mortgage insurance will cost and if it’s an upfront or ongoing charge, or both.
Then, ask the lender what your options are. The answer may be just, "Make a bigger down payment."
Or you may find there are other loan programs that you might qualify for that don’t require mortgage insurance.
You’ve probably asked this question already. But knowing what your will be is kind of key to the whole deal, right? You’ll also want to ask if there is any prepayment penalty if you pay off the mortgage early — for instance, if you move or refinance. The answer should be "No."
An provides additional profit for the lender beyond what’s built into the interest rate. A good follow-up question: What are all of your lender fees? Be sure to specify "lender fees." They’ll know what you mean because there are also additional costs, which you'll ask about next.
Fees charged by third parties, such as for an appraisal, a title search, property taxes and other, are paid at the loan signing. These costs will be detailed in your official Loan Estimate document and your almost-time-to-sign Closing Disclosure. But the sooner you know what they are, the better you can shop, compare — and prepare — for them.
» MORE: Understanding the
Will you have a single point of contact throughout the mortgage loan process? And how will you be updated on the progress: by email, phone or an online portal? Establishing your service expectations upfront, and seeing just how eager the lender is to meet them, will give a clear point of comparison among lenders.
Because of social distancing requirements brought on by the coronavirus pandemic, signing closing documents electronically is becoming more popular — and necessary.
is likely to proceed faster than a traditional mortgage closing, and you'll probably be better informed about what’s happening every step of the way.
One other benefit of e-closings: Electronic documents can't be submitted with a missing signature. On a paper document, a missing signature might not be detected immediately, causing headaches and delays.
Of course, you want to know what your target closing and move-in dates are so you can make preparations. And just as important: Ask what you in the meantime — like buying new furniture on credit and other loan-busting behavior.