10 Things To Ask When Applying For A Mortgage Loan

There are questions every prospective homeowner should ask before agreeing to the terms of a mortgage loan deal.

#1. What Is The Interest Rate?

Most conventional loans have an interest rate attached to it so before signing on the loan deal, ask about the rate and evaluate its pros and cons. The lender can give you an estimate of rates, points and other fees you are expected to pay.

#2. How Many Discount And Origination Points Are You Expected To Pay?

A discount point reduces the interest rate you are supposed to pay. It acts as a prepaid interest and is also tax deductible.
Origination points are charges made by the lender to the borrower to make up for the costs of setting up the loan.
You might be charged both for discount points and origination points or just one of two. Discount points are usually 1% of the loan amount.

#3. How Much Is The Closing Cost?

At the end of the deal, the borrower is required to pay for the services of the lender and other parties involved in the deal and these costs are called the closing costs. It is the lender that draws up estimates of the costs so make sure you ask him before starting the deal.

#4. Can I Lock The Interest Rate And What Is The Cost?

Due to the volatility of the interest rates, there may be a fluctuation of the rate between the time you applied for the loan and the closing date. So to avoid inconvenience you can ask the lender to lock the interest rate at a certain level for a fixed period of time. You may or may not be charged for it so make sure to sort it out with the lender.

#5. Is There A Penalty For Prepayment?

Some lender may penalize you for prepayment on the mortgage or if you reduce the principal balance by a certain amount. So before making any prepayment make sure you clear it up with your lender.

#6. What Is The Minimum Down Payment Required?

Down payments have a lot of advantages if they are paid in large amounts. You get lower interest rates and better loan terms. Low down payments, however, result in higher costs and charges.

#7. What Are The Guidelines And Requirements?

The guidelines pertaining to a loan may vary with the people applying for it. It may be according to income, assets, liabilities, employment or credit history.

#8. What Are The Required Documents?

Lenders may need proof of your ability to live up to your financial obligations. You may be asked to provide bank statements, tax returns, pay slips and any other supporting documents they deem necessary.

#9. How Long Will The Loan Application Process Take?

The process may take as little as a couple of weeks or in some cases a couple of months, depending on your lender’s schedule. Make sure to provide all necessary documents and assistance to facilitate the process.

#10. What Might Delay The Process?

A change in your financial or marital status may delay the application process. Employment changes, change in credit history, salary changes etc. may delay the process.