Questions to Ask The Lender

Buying a home is probably the biggest investment you will ever make, and you need to work with a lender who is forthcoming with your questions and is comfortable and easy to work with.

If this lender is not answering your questions, you may need to skip them.

Which Type of Loan is Best?

You want to know which loan type fits you best according to your Fico score and situation such as FHA, VA, USDA, Conventional, HomePath or any of the First Time Home Buyers programs and will the interest rate be a Fixed Rate, Adjustable Rate, Interest Only or Negative-Amortization Loan. Be sure to have the lender explain clearly all these options to you. It's important that you understand these options so that you make the right decision for you.

 

What is the Interest Rate and (APR) Adjustable Percentage Rate?

The interest rate and all the other related lender fees are divided by the loan's term to come up with the (APR) annual percentage rate.

  1. Please beware that an APR doesn't account for an early payoff.

  2. An APR can't be computed correctly for an adjustable rate mortgage.

For adjustable rate mortgages ask these questions:

  1. Is there a cap (highest rate) on the adjustable rate and if so what is it?

  2. What is the index?

  3. What is the margin?

  4. What is the maximum annual adjustment?

  5. How often is the rate adjusted?

What Are the Discount Points and Origination Fees?

Each "point" is equal to 1 percent of the loan amount. Therefore, two points on a $100,000 loan cost $2,000.

  1. Points buy down the interest rate, so the more points you buy the less your interest rate will be making your mortgage payments less.

  2. Points are tax deductible.

What Are All the Costs?

You need to know, and are entitled to know all your costs and fees associated with the mortgage loan.

Federal law requires that the lender provides you with a loan estimate, some lenders forget about this so make sure that you ask for it.

  • Appraisal Report Fee

  • Credit Report

  • Lenders Title Policy

  • Inspections

  • Recording Fees

  • Property Taxes

There may be a couple of extra fees associated with the closing company.

Do You Offer Loan Rate Locks?

Because interest rates fluctuate daily, you want to lock in your interest rate as fast as possible if you think it may go up. Lenders will charge 0 to 1 point to lock in the interest rate on your loan. Ask:

  1. Does the lock in protect all the loan costs?

  2. For how long does this lock in last?

  3. What do you charge to lock in the rate?

  4. Will you confirm the lock in information to me in writing.

Is There a Prepayment Penalty on this loan?

Prepayment penalties are on their way out, but ask to be sure just in case you want to pay off the loan due to a refinance or sale of the property.

  1. What are the terms of the prepayment? Some are in effect only during the first two to five years of the loan.

  2. How much is the prepayment penalty?

  3. Would the prepayment penalty apply if I refinanced through you at a later date?

Do You Guarantee On-Time Closings?

Closing your transaction on time is a must for you, you are exited and can't wait to decorate, place your furniture, make it your home and make many happy memories. However, some lenders are slower than molasses because you are not a person to them, you are just a loan number.

You have done everything on time that the lender asked you to, and now, not only are you upset, you could be looking at:

  • An increase in the interest rate if the lock expires.

  • Additional expenses and stress to reschedule movers.

  • Possible loss of home due to the end of a rental lease.

  • Possible loss of new home because seller won't sign and extension to closing.