Knowing What You Need to Know
One of the hardest parts of the home buying process, especially for first time homebuyers, is getting comfortable with all of the parts of the process. Even those who have already purchased one or more homes in their lifetime still need to learn the lay of the ever-shifting landscape when it comes time to buy another home.
Learning how to get the information you need out of the professionals you are trusting to help you through the process is a great way to make sure you’re not missing anything. In this post, we’ll take a look at the five most important questions you should be asking your mortgage professional.
1) What Kind of Loan Should We Be Getting?
There are multiple mortgage options available for most borrowers these days. Educating yourself about the big benefits and drawbacks of each kind of financing before you begin the process is ideal.
But in a pinch, your mortgage broker should be able to give you a quick rundown of the pros and cons of fixed rate loans, interest only loans, adjustable rate loans, and all of the other, lesser-known options.
2) What Are All the Costs Associated With the Loan?
These days, lenders are required to provide you with an accurate loan estimate, detailing all of the costs associated with the loan. This will include the cost of the appraisal, the credit report, any inspections, the title costs, escrow costs, and taxes, among others.
Your lender will need several pieces of information before they can do this, including personal information as well as information regarding the property in question.
3) What Will the Interest Rate Be?
The interest rate on your loan should be relatively easy for your mortgage broker to get you, but don’t stop there. You’ll also want to know what the annual percentage rate or APR on the loan will be. This can be a little bit difficult for them to tell you definitively.
Further, if you’ve elected to go with an adjustable rate loan, there’s no way to tell you what your interest rate plus other related lender fees will be, as the interest rate will vary over the term of the loan. If you are going with an adjustable rate loan, make sure to ask about its adjustment frequency, the interest rate cap, the index and margin on the loan, as well as the maximum allowed annual adjustment to the interest rates.
4) How Much Time Will It Take to Process the Loan?
Loan processing times can vary considerably. Your ability to close and some potential penalties could be riding on the answer to this question. You may want to ask for a guarantee regarding on-time closing as well. It could save you money and hassle.
5) Are There Penalties Associated With Paying Off the Loan Early?
There are many states in which prepayment penalties are no longer allowed. But, if you aren’t lucky enough to be buying a home in one of these states, you’ll need to know about the terms associated with early payoff, how refinancing the loan may affect your prepayment plans, and what the penalties associated with prepayment are.
When It Comes to Your Home Mortgage, the More You Know…
The more you know about the process and available options, the more money you stand to save. Getting answers to the basic questions can help you prepare for the process and watch out for potential problems while make the best possible decisions regarding your options.
