April 2nd, 2018 6:56 AM by Jackie A. Graves
Buying a home is one of
the biggest decisions you can make. It involves a big amount of money.
Therefore, before you make the final decision on buying one, it is important
that you know and understand your financing options. If applying for a mortgage
loan an option you consider, you will need to spend time working with them to
ensure your finances are in shape for a home purchase.
Before committing to a
mortgage lender, here are some of the most important questions you need to ask
before you apply for a loan.
What is the interest rate?
The mortgage broker will
give you an interest rate together with the loan term and the mortgage balance.
These things will comprise your monthly
payment. You need to ask for the breakdown and find out the real interest
rate because it directly impacts the amount of your monthly payment. The lower
the interest rate, the lower your monthly fees.
Which type of loan is the best?
Trustworthy lenders will
not just lay down all the loan options before you. They will take time to know
and understand what your needs are, and gather as much information as they can
before they recommended the best type of loan. When they
present various loan types, take advantage of the opportunity to ask how each
type differs from each other, and the advantages and disadvantages of each
What are the discount points and
Most lenders charge discount
points or origination fees, or both. Each point is equivalent to one
percent of the total loan amount. It means that if you take out a $100,000
mortgage, the discount point you will have to pay is worth $1,000. Because
discount points reduce the interest rate, the more points you pay, the lower
the interest rate.
What are the closing costs?
As a borrower, you will
be required to pay fees for the services provided by your mortgage lender. You
can ask for these costs because lenders are required to give you an estimate of
the closing costs in writing within three days after you submitted your loan
Does the loan have any prepayment
Some borrowers choose to
make advance or early payments on their mortgage if their budget can
accommodate it. If you also wish to pay off your mortgage early, you need to
ask at the beginning of the process if there will be any prepayment penalties.
When can the interest rate be locked
and how much will it cost?
Interest rates are still
subject to change and may fluctuate between the time you apply for the loan and
your closing. To avoid getting caught in a high-interest rate, you have the
option to lock the rate for a specific period of time. However, you also need
to find out how much it will cost if any fees apply.
What is the minimum down payment
required for the loan?
Different types of loans
require different amounts for down payments. While most mortgages require at
least 20 percent for the down payment, it is important to note that when you
pay higher for the down payment, you will get a lower interest rate and better
loan terms. However, if you can’t make a 20 percent down payment, your monthly
fees will increase and you may be required to get mortgage insurance.
What documents are required?
Lenders have their list
of requirements when it comes to the documents you have to submit. But more
often than not, they will require you to submit proof of assets, tax returns,
bank statements and recent pay stubs. However, depending on the lender, they
may require more paperwork.
How long does the approval process
If you are excited to get
your mortgage processed, ask lenders for a specific time frame on their approval
process. While most take two weeks to two months, make sure to submit your
documents on time or as early as possible to speed up the process.
If you are ready to buy a
home, mortgage loans are an excellent option. And to help you with your entire
home purchase journey, use these important questions to mortgage lenders when
you apply for a loan.
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