Buying a home is a complex project. It is only natural to have a lot of questions about mortgages. Even if you do some research in advance, you will probably need clarification on some points. Considering these seven questions will help you understand the mortgage process better. Reach out to a mortgage professional with any home loan-related questions.
1. What types of loans are available?
When you first reach out to a lender, ask what types of loans they offer. Don’t be afraid to ask mortgage-related questions you want to be answered. The mortgage professional you speak with should be more than willing to discuss the details of getting a mortgage. They should share the pros and cons of every type of home loan. The right mortgage broker will help you decide which mortgage is the best for your situation.
2. What will the interest rate and APR be on your loan?
Many people focus only on the interest rate of the loan, but you also need to know the APR or Annual Percentage Rate. The APR shows a more accurate number of exactly what the loan is going to cost you each year and over the duration of the loan. You should also ask if lowering the interest rate is possible. Often borrowers can pay for discount points to get a lower interest loan.
3. What are all of the costs of the mortgage loan?
There are costs of obtaining a mortgage. For instance, points or discount points are fees that you pay to the lender on closing to secure a lower interest rate. There are usually closing costs to create the documents and fund the loan.
Other costs you may have to pay during the mortgage process are:
- Appraisal of the real estate
- Credit check processing fee
- Title fee
- Recording fees
- Home inspection fee
4. Is there a penalty for early repayment?
Paying your mortgage off early saves you money because you pay less interest during the life of the home loan. Double-check with your mortgage broker to make sure that there is no prepayment penalty for paying off your mortgage early. It is unlikely that a lender would charge a prepayment penalty, but it is best to check before you commit to a home loan. These protections are the result of federal mortgage servicing rules.
5. Do you have in-house underwriters?
Mortgage underwriters are responsible for reviewing your mortgage application. They can deny mortgage applications or make conditions for approval. Some mortgage lenders have in-house underwriting, which can speed up the processing of your mortgage. Keep in mind that FHA or VA loans can take longer to process. Check with your lender about underwriting. If it is not done in-house, ask how long the process usually takes.
6. How long will it take to fund the mortgage?
Funding is a critical part of getting a mortgage. When you buy a house, the purchase contract contains the closing date. Not having funding by that date can cause serious problems, especially if you are ending a lease at your current home or have a specified move date. Check with your lender to get a clear idea for the date of funding. Work with your mortgage broker to set an appropriate closing date.
7. Is the closing date guaranteed?
Because the closing date is so important, you want to make sure that your lender will be able to meet it. Ask them if they set the closing date if it is guaranteed. If they are unable to guarantee the closing date, ask for a different closing date that is further out. You don’t want to be caught at closing without funding for the transaction. This might have financial and legal ramifications.
Buying a home is not only fun, but it is also a challenging process. If you ask the right questions of your mortgage lender, you will be well prepared for the process. Constantly communicate with your lender. If something is unclear, ask questions. Contact an expert mortgage professional and learn about your mortgage options.