10 Important Questions To Ask Your Mortgage Broker Or Lender In Texas
Are you planning to get a mortgage loan? If so, you need to ask the right questions from the mortgage broker or lender before committing to the loan. You need to know about the type of loan you are getting and whether it’s right for you. Not asking the right questions may lead to many problems after you get the loan. Unanticipated and hidden fees are a big issue with most mortgage loans. That’s why you need to continue to shop for the right mortgage broker or lender until you feel confident about the answers you are getting.
Having a solid relationship with the broker is important to get the best deal in town. You will get better assistance, advice, and accurate information from the broker the more he or she knows you. You shouldn’t hesitate to share your personal information with the broker or lender including permission to run your credit report to build a solid relationship with the broker. Here are 10 questions to ask the broker or lender before committing to the loan.
1. Which Type Of Mortgage Loan Is Best For You?
A good lender will want to know more about you and your goal before placing different loan options in front of you. You wouldn’t want a doctor to suggest surgery before knowing your medical condition and history. Likewise, the broker should gather sufficient information before offering the best type of loan for you. Ask the lender or broker to explain the pros and cons of adjustable-rate loans, fixed-rate loans, negative amortization loans, and interest-only loans. Check out how each option would fit in with your personal situation.
2. What Is The Annual Percentage Rate & Interest Rate?
The annual percentage rate (APR) of a mortgage loan is a complex calculation. It adds the interest rate and other related lender fees and divides the sum by the term of the loan. But all brokers don’t compute the APR correctly. On the other hand, you cannot accurately compute the APR rate for an adjustable loan. The APR won’t account for early payoffs either. Ask the lender about the adjustment frequency if the interest rate is adjustable. Also, don’t forget to ask about the highest rate or cap, the margin, index, and the maximum annual adjustment.
The 20% down payment is not always mandatory. For example, if you are well-qualified for the loan, you can get away with a down payment of 3% for some types of loans. But there are pros and cons to a lower down payment. Make sure you ask the lender about all the options you have.
One disadvantage of a low down payment is you will have to pay for private mortgage insurance if you put less than 20% down. You will have to pay an increased monthly payment and more closing costs under such circumstances.
4. What Are The Origination Fees & Discount Points?
Each point will be equal to 1% of the loan amount. For example, two points on a $100,000 mortgage will cost you $2,000. The more points you pay, the lower your interest rate will be. Points are also tax-deductible. Most lenders have origination fees in addition to points. They are also known as lender fees. You should ask about lender fees when you are trying to get information on a lender’s or broker’s policy.
5. What Are All The Costs?
Mortgage lender fees also include third-party vendor fees such as credit reports, appraisals, pest inspection reports, title policy, taxes, recording fees, and escrow where applicable. The loan estimate should include an estimation of all these fees. Federal law requires that the broker or lender gives you a loan estimate when getting a mortgage loan. The lender should deliver the loan estimate when the loan application has been completed.
6. Is It Possible To Get A Loan Rate Lock?
Interest rates can change or fluctuate on a daily basis. If you believe that the interest rates are moving up, you should ask the lender if it’s possible to get the loan rate locked. A lender should charge zero to one point to lock the loan rate. Ask if the lender charges a fee for the service and whether the lock-in protects all the loan costs. Are they giving the loan lock-in writing and for how long will they lock the rate?
7. Are There Any Prepayment Penalties?
Some states don’t allow prepayment penalties. So, you need to ask about this. A prepayment penalty will allow the lender to collect an additional 6 months of unearned interest if you decide to pay off the loan early – ether by selling the property or through a refinance. If your state permits prepayment penalties, make sure you ask the lender how much it is. Get to know about the terms of the prepayment since some are in effect only during the first 2-5 years of the mortgage loan.
8. Will The Lender Approve The Loan In-house?
Make sure you get to know if the lender can handle its own underwriting or it’s assigned out. Underwriters will review the loan and issue certain conditions before rejecting/approving the mortgage. FHA and VA loans would take longer to process. But some lenders will automatically approve or disapprove a loan without sending it to the FHA or VA.
9. How Long Will You Take To Disburse The Loan?
The average time to process a loan is between 21 to 45 days. You should know about the closing date when writing a purchase contract. You should coordinate with the lender to get this date. Ask about the obstacles to closing the loan and how long the final application approval will take.
10. Do You Guarantee On-Time Closings?
Closing the transaction on time is important. Your lender should be able to give you a closing date with committing to the loan. You will have to face problems if the lender can’t disburse the loan on time. Ask about any increases in interest rates if the lock-in expires. What if you have to pay movers to reschedule? You need to ask all this from the lender before committing to the loan.