What Are the Interest Rate AND Annual Percentage Rate of the Loan? Find out what the interest rate will be on the loan as well as the annual percentage rate (APR). The APR is a combination of the interest rate, points and other charges divided by the loan’s term to give an annualized rate. It is the best way to properly compare loan costs.
How Many Points Will I Be Charged? A point is 1% of the loan amount. (example- 1 point on a $150,000 loan is $1,500) Points charged are an additional fee in addition to regular closing costs. A loan with a lower interest rate but many points may cost you thousands more than one with a higher interest rate but no points. This is important because the number of points charged varies with whoever you work with. Make sure when comparing deals you look at the whole picture. A good Broker can explain the benefits of both options to you. Also, watch out for hidden points. IF you are paying a very large application fee, origination fee, or administration fee these may not e called points, but they really are. 1% of your loan is a point, whether or not it is called one on paper.
What will be the Total Closing Costs/ Fees Charged? Total closing costs include lenders fee's, recording fees, title fees, attorney fees, document prepping fees, appraisal fees, Points etc. Some brokers/bankers will initially disclose closing costs which seem low, only to provide much higher costs at your closing. Ask the broker/banker to explain the costs to you line by line, and ask them how they guarantee them to you. Ask if you get something in writing.
How/When do you "lock" an interest rate? Is There an Additional Charge to Lock-In my Interest Rate? Most lenders offer a lock-in policy that guarantees you a certain interest rate and points for a certain number of days. Interest rates change daily, so you will probably want to ask what the lender/broker can do if interest rates go down. Unless you are locking for more than 60 days, there should be no upfront fee. Find out what the policy is if you go beyond the lock term (ie. You lock your loan for 30 days but cannot close until 35 days later... is your interest rate still available (maybe for a small fee) or does the interest rate go to the current market rate?) Most lenders offer some way to keep the interest rate through an extension, which is a small percentage of the loan amount (like an eighth of a point) but some do not. Make sure you know.
How Long Does it Take to Process My Mortgage? What is the mortgage process with you? Processing is the means by which your loan is prepared for underwriting through the time your loan is ready to close. The time it takes to process a loan varies by the type of loan and even among lenders. Loans can usually be closed within 15 to 20 business days. Faster times are possible, but the lenders who move faster may not have the best interest rates. To get the best deal, try to ensure you have up to 30 days available to close, and insure you are ready to help your mortgage professional gather all the necessary documentation If time is of the essence, a lender with quick processing, underwriting and funding capabilities can prove to be a very valuable asset. Learn about the mortgage process
Do I have to pay PMI (Private Mortgage Insurance)? Mortgage insurance is different from homeowners insurance. Mortgage Insurance is a policy being paid to protect the lenders interest in the property not protected by the government, who guarantee lenders coverage for 80% of a home's value.
Is There a Pre-Payment Penalty? Prepayment penalties are placed on some loans to keep you from paying more than 20% of the loan off in any given year. Most conventional loans don't have them, but here are some that do. Lenders will often offer a better interest rate to someone taking a loan with a prepayment penalty, as they know they will make more money in interest payments over the next few years if you keep the loan with them. Ask your broker/banker if there is a benefit to having one for you.
What Do You Offer to the First Time Buyer? Purchasing a home is among the most significant financial commitments most people will ever make. If you are a first time buyer, you may find you have many questions. A good broker or banker will be able to provide you with both information and a personal commitment to assist you throughout the whole process. Be sure to ask about how they will keep you informed during your loan process.
