Before you take out a loan, you should be armed with the right questions to ask your mortgage lender. Probing your lender for key information won’t just educate you about what could be a very complicated process; it can also ensure that you aren’t getting yourself locked into any unanticipated fees and hassles. Before you sign the dotted line, here’s how to choose a mortgage lender who will get you the best loan possible and keep you informed throughout the entire process. Ask these questions early so that you’re not asking yourself later, “What have I done?”
1. What Types of Home Loans Are Available?
While some lenders offer a variety of mortgage products, others specialize in just one or two types of home loans. Choosing a lender that offers the type of mortgage you need is crucial, whether it’s a fixed-rate loan, an adjustable-rate mortgage, a VA loan or some other variety. Knowing the types of loans available will help you decide which one is best for you based on your income, assets, credit, debt and other information they’ll investigate your finances. Don’t be afraid to ask a lender to break down the pros and cons of each. In a long-term commitment, it’s good to know all the details.
2. What Is the Interest Rate and APR?
Fixed-rate loans indicate that the interest rate you pay stays the same throughout the life of the loan, while adjustable-rate mortgages offer a low interest rate for an introductory period and then adjust according to market fluctuations. Each type of loan carries its own interest rate and annual percentage rate. Knowing both will give you a clearer picture of what the loan will cost you each year. Keep in mind there’s no way to compute an APR for an adjustable-rate loan, so be sure to ask your lender if your interest rate is adjustable.
3. What Will the Loan Cost?
Borrowing money costs money and your lender should be prepared to give you a full picture of all the costs associated with the loan. While closing costs typically run about 3 to 4 percent of a home’s sale price, there are many other fees involved, including discount fees, home inspection fees and escrow fees. Borrowers should know that the cost of the loan goes above and beyond repayment for funds borrowed and accumulated interest. The borrower should also know that some closing costs are negotiable, such as attorney fees, commission rates and messenger fees.
4. How Much of a Down Payment Do I Need?
While the standard down payment figure remains 20 percent of the loan, some buyers can get away with 3.5 percent, depending on the type of loan. Of course there are pros and cons associated with the amount you choose for your down payment, so be sure to talk them through with your lender. There are also several down payment assistance programs that may help you save. One study found that buyers who used down payment assistance programs saved an average of $17,766.
5. Will I Be Penalized for Early Repayment?
You might think a lender would feel pleased if you paid back your loan early, but be aware that there may be associated fees. Prepayment penalties allow the lender to collect an additional six months of unearned interest if you pay your loan off early. While these penalties are not allowed in some states, check the rules with your lender.
6. Do You Offer ScoreMaster?
ScoreMaster helps borrowers and mortgage brokers commit to a plan for better-quality loans. By providing a clear course of action through a gamified dashboard, ScoreMaster helps borrowers achieve their best credit score in 20 days and protects against credit score drops during the loan process. If your lender offers ScoreMaster, you won’t just get a better credit score; you’ll get access to better loans and increase your chances of being approved for the loan you want.
Learn more about why your mortgage lender should offer ScoreMaster.
*Legal Disclaimer – ScoreMaster is a patent-pending educational feature simulating credit utilization’s effect on credit scores via payments or spending. Your results may vary and are not guaranteed.
References:
- https://www.realtor.com/advice/finance/which-type-of-mortgage-is-right/
- https://www.realtor.com/advice/finance/10-questions-ask-mortgage-lender/
- https://www.thestreet.com/personal-finance/real-estate/down-payment-on-house-14686280
- https://themortgagereports.com/33553/complete-guide-to-down-payment-assistance-in-the-usa