9 Questions You Should Ask Your Lender

Real Estate tips provided by Royan Johnson,
taken from Realty Inner Circle

Before you sing on the dotted line, ASK:

What Types Of Mortgages Does Your Lender Offer?
Most mortgage company offer a wide array of loan options to fit various situations. Tow most common loan types are fixed-rate and adjustable-rate mortgages (ARMs).

A fixed-rate mortgages interest rate and principal payment remain constant for the live of the loan. Since the interest never changes during the life of the loan, the borrower can always budget for the mortgage payment. (Keep in mind that Insurance and Taxes are adjustable annually if the borrower is escrow they may see slight adjustment in their mortgage payments due to these annual adjustment). A fixed- rate mortgage is the best option especially if the borrower is planning to stay in the home for a while (5 years or more).

With the ARMs, the interest rate and your payments are adjusted up on down periodically as the market index changes. The rate usually is adjusted between three months and five years. ARMs are usually protected by caps that limit how much the interest rate adjusted up the first time, and each successive time or overall. This option is good in you are getting a mortgage at a time when rate is high or if you are planning to sell before the first adjustment period.

1. What Is the Interest and Annual Percentage Rate (APR)?

The interest rate used to calculate your total cost over the live of the loan and the amount of your monthly payment. (The higher your interest rate the more your monthly payment will be). The APR is derived by calculation that includes the interest rate and all the other related lender fees divided by the loan term.

2. What Are the Discount Points and Origination fees?

Each point equals 1% of the loan amount. Therefore 1 point on a $200,000 loan cost $ 2,000. Points are a way to buy down the interest rate. The more points you pay the lower your interest rate. Lenders may have some restrictions on points buy down. Points are tax deductible, no matter who pays for them. The longer you plan to stay in the home the more it worth it to pay for discount points.

3. What Are The Closing Costs?

Closing costs are fees included in your loan, usually include charges for credit reports deed search and more.Your lender is required by law to provide a good faith estimate of your loan's closing costs within three days of receiving your application. Your mortgage consultant should explain the purpose of all the fees Your Real Estate Professional should try to have the seller pay some of these closing costs on your behalf.

4. What Are Rate Locks and When Can You Take Advantage Of Them?

Interest rates fluctuate daily. Think about licking in the interest rate if interest rates are rising. Licking in interest rate is usually good for 30 to 45 days while you search for the right home. Lock in the interest rate on application not an approval. So if the rate goes up between the time you applied and the time you are approve you will not have to pay the higher rate.

5. What Is The Minimum Required Down Payment?

The down payment determines the loan's rate and term. The minimum down payment is the lowest amount of money you can put down on your home; this is expresses as a percentage of the property's value. Required down payment usually range from 3%-20%. A 3% down payment requires 97% financing, with a 5% down payment 95% will be financed. The larger the down the lower the principal and monthly payments. Larger down payment usually enables you to obtain a lower interest rate. Down payment less that 20% requires you to have mortgage insurance (PMI).

6. Is There A Prepayment Penalty?

Sometimes if you pay off your mortgage early you could be charge a prepayment penalty. The penalties usually are as much as 3% of the loan balance or the equivalent of six month's interest. Often, prepayment penalties decline or disappear over time. Some time you maybe able to secure a better interest rate if you agree to a prepayment loan. You may want to think twice before you agree to a loan with a prepayment penalty. Most borrowers do not stay in the home for the life of the loan. They usually refinance or sell the home.

7. How Long Will It Take To Close My Loan?

Closing time may vary from about 2-6 weeks, depending on how long it takes to assess your documentation and check your credit. Try to submit your application far enough in advance to ensure funding for your loan. Talk to your real estate agent about allow the maximum time (6 weeks) for closing when you find the home you want to purchase. This will give your loan processor more time to work on your loan. If the loan processor is done before the maximum time, ask your agent to request a change of closing date so you can close earlier.

8. What Might Delay My Loan Application?

Avoid potential delays by making sure your application is complete, correct and legible. Provide all the supporting documentation needed so; your loan processor will have all the necessary information to proceed with the processing of your loan.

9. What Are The Documentation Do I Need?

Some of the documentation that you need are name and contact information of your current employer, proof of income, social security number, bank statements, and any assets you have. You loan officer should provide you with a check list of all the documentation you will need for the loan to be processed.

Real Estate tips provided by Royan Johnson, taken from Realty Inner Circle