Asking questions is the best way to get informed and it’s extremely important to ask your mortgage broker or lender about your loan. Here are 10 queries you should have.
There are numerous forms of loans out there and some are suitable and some aren’t. A good broker or lender will look at your situation, assess it and suggest the right loan type for you. Make sure to ask about the in depth benefits and downsides of each suggested.
What’s the Interest and APR?
The APR is quite a complex figure and includes both interest rate and other fees. However, it’s important to know it but remember that that it cannot be computed for an adjustable loan and doesn’t account for early payoffs.
Are there Discount Points and Origination Fees
A point is 1% of $100,000 or in other words $1,000 on each $100,000 borrowed. These are often added to origination fees. Simply, the more points you pay the lower the interest rate.
Remember that there are other costs – so, ask how much they will be. Extras such as appraisals, credit reports and taxes all add to the cost of the loan so ask. The lender is required to give you a Good Faith Estimate (GFE) by law.
Guarantee of GFE
The lender doesn’t have to guarantee the GFE, but they do have to offer you one within 3 days after you’ve applied for a loan. Most lenders do guarantee them, so go elsewhere if they don’t.
Ask if you can change from a variable to a fixed rate
Some lenders allow you to change from a fixed to variable mortgage if you believe that the interest rate is rising. Ask if you can do this as it can save you money if you get the timing right. Ask about details such as whether they will lock the rate, how long for and if there is a cost.
Some places charge a repayment penalty if you pay off the loan early after a sale. Ask details of whether this is the case with your loan and for how long into the loan. Also, ask whether it will be the case if you refinance with them.
Ask if the loan is approved in-house and if the lender can underwrite it themselves.
Loan times vary and some are longer than others. If you are writing a purchase contract you will need a closing date and so this information is vital to have from the lender. Ask them how long the projected turnaround is and what obstacles could hold it up?
Yield Spread Premium
This is the amount of commission that the officer receives as commission from the lender as part of the loan. It increases the cost of the loan as it often is paid from it. Discuss this rate beforehand to lower the commission and perhaps lower the loan.
Cormac Reynolds has written numerous articles on home finance and writes this for Yousellquick.co.uk who helped him sell my house quickly