Questions to ask your lender

Before you sit down with any lender or broker there are some questions that you should ask them before you go any further in the loan process.

First, you should ask what interest rate will be. Ask for the APR of the loan's interest. Normally, the APR is higher than the original rate because of the fees involved in getting a loan. You should be aware of APR's founds in ads. These are often used to bait and switch customers just to get them in the door. Always ask for an itemized GFE (Good Faith Estimate).

You should always ask how much the mortgage is going to cost you from closing costs, points, pre-paid items, escrows, etc... Please note that pre-paid items and escrows will (should) be the same from lender to lender. At the preliminary stage you will probably see different numbers calculated from one company to another in regards to escrows and prepaids. The reason is because these items will depend upon the exact closing date, how much your taxes and insurance are and when these items are due to be paid. Shop between several companies to insure you are getting a good deal on your home loan transaction.

Discuss with your loan officer the type of mortgage program that fits your situation, Fixed or ARM, 30 years or 15, fully amortized or interest only, etc. Each type of mortgage is designed with a particular borrower in mind, and is not suitable for every home buyer.

Ask your lender what causes rates to change. Their response should give you an idea if you're dealing with a mortgage professional.

Ask your mortgage professional to explain any programs he or she recommends. Make sure you completely understand your loan program, including fees, rate, possible future adjustments, any negative amortization, and pre-payment penalties before you sign at closing.

The process of obtaining a mortgage loan can be tedious and confusing. By asking the right questions, you can have a better understanding of the process and be certain that you are getting the product that best fits your needs and circumstances. Here are
some questions that will help you get key answers about your loan, so you can make an informed decision:

1. Are both fixed-rate and adjustable mortgage loans available? What is the interest rate?
2. How long can I "lock-in" the financing at the current interest rate?
3. Is a float down lock available in case rates drop after I have locked in?
4. What are the other fees a lender may charge me in conjunction with my loan?
5. Are funds for a second mortgage available?
6. Will this loan be sold on the secondary market or will it be placed in your portfolio?
7. If private mortgage insurance (PMI) is required, at what point can it be eliminated?
8. What is the procedure for eliminating private mortgage insurance?
9. What is the up-front charge for private mortgage insurance and what is the renewal fee?
10. When does the mortgage servicing department pay the property taxes to insure the income tax deduction for that year?
11. How many months worth of property taxes and insurance are required for the reserve account?
12. If obtaining an adjustable rate mortgage, describe how and when the loan can be converted to a fixed rate mortgage and what charges will be involved. Will another appraisal be required?
13. If obtaining an adjustable rate mortgage, what are the margin, index, and anniversary for adjusting the payments?
14. When is the house payment due and when is the late fee incurred? What is the late fee?

If you are considering and FHA or VA mortgage be sure to ask up front if your preferred mortgage professional is HUD approved. You may find than many smaller mortgage companies are not HUD approved but will refer you to another company that is.

It is a good idea to ask any questions that you may have about the loan and the loan process at the beginning. If you wait until the end, you may feel pressured to sign the papers, because of all the work that was put into them. You are the person that is responsible for making the payments, so you need to feel comfortable with your loan program.

» DISCLAIMER: The information contained in this article on 'Questions to ask your lender' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.