Getting a mortgage is a significant financial commitment, so you'll need to ask some questions before you sign the loan papers. By talking to the lender before you agree to a loan, you can get information for offer comparisons and avoid having unpleasant surprises later. Your lender should answer all your questions before you sign any final paperwork.
What About My Interest Rate?
At the top of the list are the interest rate and a summarized list of the charges included in the annual percentage rate. The APR, expressed as a yearly percentage, represents the total loan fees. You may use the APR to compare the loan's cost with offers from other lenders. Ask if the lender will lock in the offered rate during application processing and whether the rate is fixed or adjustable. A fixed rate won't change, but an adjustable rate will reset at a point set by your loan terms. An adjustable rate may go up, but the amount depends on what index the lender uses to set it. Ask the lender for the index information and if there are any maximum interest rate caps in place to protect you from a huge jump.
What Fees Do Your Charge?
Your lender should give a complete list of all loan fees at your request. You should review all fees and charges so you can compare the amounts with quotes from other lenders. For example, the lender might charge points on your loan. If you pay discount points, you'll get an interest rate reduction. Origination points cover the lender's processing costs but don't affect your rate. Find out what type of points you'll have, the effects on your loan and what the cost is.
What Are My Loan Terms?
Find out how much your down payment will affect the loan cost, what your repayment schedule is and details on other significant areas of the loan agreement, such as late fees. If you're planning on paying the loan off early or refinancing later, ask the lender if any prepayment penalties apply. A prepayment penalty is a fee you'll have to pay if you pay off the mortgage before the end of its term.
What Do You Need?
Lenders ask for a lot of documentation from you, including proof of income, proof of identify and evidence of employment. Ask the lender exactly what you'll need for your application so you don't delay processing. The lender may have a checklist to follow so you don't miss anything. Ask for an estimate of the loan processing time and what might hold it up, such as any overdue debts you have. You can use this information to fix potential problems before they delay your application.
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