House Buying Tip of the Day: 6 Questions to Ask Your Mortgage Lender
Posted on Wednesday, May 10, 2017
House shopping can be confusing; be sure to ask your mortgage lender questions to clarify.
House buying can be a stressful time. You need to decide whether the home you are considering is the right one, in the right neighborhood, at the right price. You also need to negotiate a mortgage for that home. When you are looking into financing for your future home, what questions must you ask your mortgage lender?
1. What is the Interest Rate?
Your interest rate will help determine the amount you pay over the lifetime of your mortgage. Get an interest rate quote and a quote on the annual percentage rate. That way, you will be able to calculate your payments each month and over the lifetime of the mortgage.
Be sure to ask if there is a way you can make that interest rate better. A lender may not offer you the best offer right away. Also ask if there are restrictions and stipulations as to when you can lock in an interest rate if it is a variable rate. Locking in at a lower rate will save you money in the long term, but there could be fees associated with this transaction as well.
2. How Much Is The Ideal Down Payment?
In many cases, it is best to have at least 20 percent of the purchase price if you are getting a mortgage. There is a strong chance that private mortgage insurance premiums will be added to your monthly payment if your down payment is less than 20 percent. However, each loan is different. Talk with your mortgage lender to see how much of a down payment you need to provide and what the financial implications will be if you do not have the recommended amount.
3. Can I Prepay the Loan?
If you are expecting a change in circumstances such as an inheritance or a change in your employment status, it can be valuable to choose a loan that allows you to prepay some of your mortgage. However, some lenders will penalize you if you choose to prepay. Others only allow you to prepay at specific times of the year or when you renegotiate the mortgage. Look at your circumstances and the lender's restrictions around prepayment before you decide whether you would like a mortgage with prepayments allowed.
4. What Other Costs Will I Incur?
There is the cost of the mortgage and the interest, but there are also other associated costs when you get a mortgage. Ask your lender about the closing costs such as attorney fees, title searches, and appraisal fees. Are there other costs that you will incur? Consider how you will pay those costs. According to Bankrate, "lenders are required to provide a written estimate of these costs within three days of receiving a loan application."
5. Are There Any Special Programs Available?
You do not want to miss out on an opportunity to save money on your mortgage. Depending on where you live, there may be incentives for first-time home buyers or savings possibilities for those in the military. You may be able to get a government-sponsored mortgage as well. It always makes sense to ask your lender if there are any special programs or rates that might apply to your situation.
6. What Documents Do I Need to Provide to the Lender?
When you are getting a mortgage, you need to collect documents that allow the lender to make a decision about whether to offer you the mortgage and what interest rate to offer as well. Documents that you might need include: proof of income, proof of assets, tax returns, and pay stubs. If you are working with others to secure the loan, they will need to provide documents as well.
At the blog at Open For Homes, we're here to help you make the right decisions about the right home. Whether you rent or buy, turn to Open for Homes to get the latest on the housing market and house buying trends.