16. Mortgage Basics - 10 Questions to Ask When Loan Shopping

10 Questions to Ask When Loan Shopping:

Below are 10 important questions to ask when you are interviewing with your lender:  

1. How long will it take to process my mortgage loan application?

It will depend on how long it takes to get a property appraisal, check your credit report, and to verify your financial and employment information. It typically takes between 45 to 60 days, but can take as little as 30 days or as long as 60 days.

 2. What documents will I need?

Be sure to have proof in income and assets and employer information. For more details, see the section on Necessary Paperwork.
 

3. What do I need to qualify for the loan?

Mortgage lenders take many different things into account when considering your loan, including your income, employment history and security, assets and liabilities, credit record, the property appraisal, and how much down payment you can put down.

4. What is the minimum down payment?

Your down payment can help in determining your interest rate, the terms of your loan, and whether or not you have to pay private mortgage insurance (PMI). Typically, the more down payment you can afford, the lower your interest rate, and if it is 20 percent or more, you don't have to pay PMI. See the section on down payment and private mortgage insurance for more information.

5. What percentage is the annual interest rate?

 
When comparing between different loans, ask for the annual percentage rate, or APR, which is generally higher than the initial quoted rate because it takes into account all lenders fee.

6. What are the points or origination fees on the loan, if any?

 
Points are prepaid mortgage interest. You may have to pay points at closing in order to get a lower interest rate on your loan. Origination fees are charged to cover the cost of processing your application or to simply boost profits. See the section on points and origination fees for more information.

7. Can I lock in the interest rate?

 
Due to daily fluctuations in interest rates, your final interest rate may not be the same as the initially quoted value by the time you close on the home. Therefore, ask if you can lock in the rate for a specified period of time, and if there are any fees to do so. Also, ask if you can lock in points.

8. What is the ?good faith estimate' of closing costs?

 
In addition to your down payment, there are also one time closing costs to consider when applying for a mortgage. As these can add up to a hefty sum, be prepared and remember that some services, like the credit report and property appraisal, must be paid for upfront.

9. Does the loan have prepayment penalty?

 
Unless stated otherwise, lenders may be able to charge you thousands of dollars for paying off your mortgage early. Find out the duration of any penalty period and how the fee will be calculated. You may also be able to avoid this penalty if you agree to keep the payments to a previously specified amount.

10. What factors can delay loan approval?

 
If the lender discovers discrepancies in the information you provided or in your credit report that you did not disclose. Therefore it is important to obtain a copy of your credit report before applying, and to disclose in detail any potential problems. Also, notify your lender if there are any changes in your personal or financial status during the application process.