Jeff’s Carlsbad Blog for First Time Home Buyers


Questions for your Lender

Posted in Mortgage info by Jeff Dowler on September 30, 2006

Getting pre-approved is a critical part of the purchase process, and you need to do this early on so that you will know how much you can actually afford. The pre-approval process will also make you aware of any credit problems that need to be addressed, if any, so you can take care of them before actually trying to obtain a mortgage; some issues will prevent you from getting a loan, so you want to know about these problems right away, as well as errors on your credit report, which are not uncommon.Here is a list of some questions to ask your lender. This is not, by any means, an all-inclusive list. 

  1. Are both fixed-rate and adjustable mortgage loans available?
  2. What is the interest rate?
  3. How long can I “lock-in” the financing at the current interest rate?
  4. Is a float down lock available in case rates drop after I have locked in?
  5. What are the other fees a lender may charge me in conjunction with my loan?
  6. Are funds for a second mortgage available?
  7. On adjustable loans:
    – How often will the interest rate be adjusted?
    – Is there a maximum limit on each rate change?
    – How often will the monthly payment be adjusted?
    – Is there a ceiling on payment adjustments?
    – Can the term of the loan be extended?
    – What is the maximum rate that can be charged over the life of the loan?
    – Is there any potential for negative amortization?
  8. Is there a pre-payment penalty clause? This involves extra charges for paying off the loan before maturity. About 80% of all loans in the
    United States are paid off early.
  9.  What is the “grace” period?
  10.  How late can a monthly payment be made before a late charge is assessed?
  11.  What will happen if a payment is missed?
  12.  If you sell your house, will the new buyer (if he/she qualifies) be able to assume   your mortgage at the same interest rate?
  13.  Do you have to pay “points” to get your new mortgage? Usually lenders charge points for the cost of giving you a mortgage loan. A “point” is 1% of the loan.
  14. Will the lender require mortgage insurance?
  15.  Is the loan serviced locally (by your lender) or is the servicing sold? And if it is sold, when can that occur?
  16.  Ask for a written “good faith deposit”.

There is more information on the loan process and related matters in the Buyer Reports section of my website.

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