Qualifying for a mortgage (and making sure to choose one that is within your means to pay off) can be a confusing process. If you’re not sure where to start, these 8 questions to ask your mortgage broker should help.
What Type of Loan Is Best For Me?
You should definitely ask your mortgage broker for advice about the best type of mortgage for your situation. This is also a good way to judge whether or not you’re using a quality mortgage broker. Good lenders will ask lots of questions (Are you self-employed? Are you currently paying off a lot of debt? Are you looking to do renovations? Do you plan on refinancing? etc.) about your situation before providing an answer to this question.
Can You Explain The Interest Rate / Annual Percentage Rate?
Every mortgage is different, and whether you have a fixed rate mortgage or an adjustable rate mortgage makes a big difference. Make sure you understand how much you will be paying over the life of the loan and how much you can save by paying off early.
Can I Buy Points or Lock My Loan?
Most mortgages allow for you to buy points off of the interest rate by paying more up front. On the flip side, you may be able to pay a slightly higher interest rate in exchange for locking the rate in - which can help if interest rates increase. These options can save you substantial money in the long run, so it’s worth asking if your loan qualifies so that you can weigh your options.
What Is the Loan Estimate, Including All Costs?
The loan estimate should include all costs associated with the loan, including: taxes, escrow, recording fees, lender’s title policy, credit report, appraisal, and inspection reports. The lender is legally required to share this estimate with you.
Is There a Prepayment Penalty?
What happens if you decide to pay off your mortgage early - either all at once or by using the biweekly payment method? Most states don’t allow prepayment penalties any longer, but there are still lenders out there who will charge a fee for part of the uncollected interest if you prepay the mortgage.
How Much Time Do You Need for Closing?
Make sure you know how long it will take to close so that you can plan accordingly. The average is 21-45 days. You need to know this so you can write the purchase contract correctly. Be sure you understand the obstacles that can stand in the way of your loan closing. It’s also worth asking if they guarantee on-time closings, as late closings can wreck home deals quickly.
These questions should help you get the information you need to make an informed mortgage decision. Go in with all your questions and current interest rates written down so you don’t forget them. If you’d rather get started with your mortgage online, we can help.