Ten Questions to Ask your Lender

The following represents questions you need to ask your lender when purchasing a home.

• What is the interest rate on this mortgage? To effectively compare different lenders’ programs, ask for the annual percentage rate (APR) of the mortgage interest. It is generally higher than the initial quoted rate because if includes some fees.
• How many discount and origination points will I pay? Lenders may charge prepaid mortgage interest points to lower your interest rate or other points that have no benefit to you at all.
• What are the closing costs? Mortgages come with fees for various services provided by lenders and other parties involved in the transaction. Lenders are required to provide a written good faith estimate of closing costs within 3 days of receiving a loan application.
• When can I lock the interest rate and what will it cost me to do so? Your interest rate might fluctuate between the time you apply and closing. To prevent it from going up, you may want to lock the rate, and even points, for a specific time.
• Is there a prepayment penalty on this loan? Maybe. Some penalties are 1% of the loan amount, others are equal to 6 months’ interest, some apply only when you refinance or reduce the principal balance by 20% or more.
• What is the minimum down payment rerquired for this loan? The rate and terms of your loan will be based on a down payment figure. If you can put down more money, you may be able to lower your rate and improve your terms.
• What are the qualifying guidelines for this loan? These requirements relate to your income, employment, assets, liabilities and credit history. First-time home buyer programs, VA loans and other government sponsored mortgage programs typically offer easier qualifying guidelines than conventional loans.
• What doments will I have to provide? Most lenders will require proof of income and assets before approving your loan. Buyers with excellent credit may qualify for a no-documentation or “no-doc” loan. For those buyers who can’t document their income or assets there are other programs available.
• How long will it take to process my loan application? The answer will depend on a number of variables. The best way to insure a speedy process is to get all the needed documents to your lender as soon as possible.
• What might delay approval of my loan? If you provide the lender with complete, accurate information, the loan process should run smoothly. Make sure you notify your lender if you change jobs, increase or decrease your salary, incur additional debt or change marital status between the time you submit an application and the time the loan is funded.