Important Questions to Ask Your Lender
If you don’t have enough money for a house, the next option would be a loan. But, before you go searching for a mortgage lender, you have to think in advance.
Think about loan terms that can fit you, your finances and, most importantly, important questions you can ask lenders. This pre-planning step is going to lessen the time you spend in looking for the right lender.
After looking at your financial capability and looking into loan terms, below are some important questions to ask your lender:
1. Can you tell me about your interest rate?
Interest rates are not the same with every loan. The lender will give you an interest rate that’s based on your type of loan and credit score. It helps if you know the average interest rates in your state. The numbers will serve as your basis for knowing if the interest rate from a specific lender is high or low. For Minnesota, you can check the averages on Bankrate.com.
2. What is your policy on discount and/or origination points?
Most lenders give discounts points as well as origination points. Discount points is equivalent to 1% of the loan amount. The more points the borrower pays, the lesser the interest rate on the mortgage. You can also think about it as interest that you prepay. Origination points, on the other hand, are charged by the lender for the costs of making the loan.
Lenders can either have just one or both in their terms so you have to double check.
3. Is the loan fixed or variable rate?
Fixed rate loans are better for you if you want to have a set budget for your monthly payment. The interest rate on fixed rate loans remains the same within the agreed loan period. In comparison, variable interest rates will fluctuate and can go up and down. Variable rate loans can be a good fit if you’re planning to have a short term loan. It is possible to pay less with variable rate loans but there’s always the risk of higher interest rates.
4. What happens if I am late in my payments?
To cover all of your bases, you need to ask this question. Just in case abrupt changes happen in your financial situation, you’ll know what to do to prevent foreclosure.
5. What other fees do I have to pay?
It is always a good idea to ask a summary of the fees that you need to pay. Aside from the origination and discount points, you also have to ask about closing fees which are common in mortgage loans. Mortgage insurance might also be part of the “other fees”. Ask how much the mortgage insurance is as they tend to be pricey.
6. What are the qualifications for this loan?
You have to be approved first before the loan is released. You have to qualify and pass your lenders requirements. That is if you qualify at all. You have to know what the requirements are so you won’t have to waste your time applying for a loan you don’t qualify for.
7. Do I qualify for other loans with lower interest rates?
You have to know your options. That’s why asking this question is important. You have to ask if there are any other loans that can save you money or fit your budget better so you have a choice.
All of these questions will allow you to learn more about the loan you’re getting. They’re not only for education too. They also prepare you for future situations. You’ll know what to do when something unexpected happens. For more mortgage and real estate tips, check out our blog.