What are the questions to ask a mortgage lender if you are finalizing one from a shortlist?Answer:
If have a bunch of good offers from different lenders and are in the process of finalizing one, these are the questions to which you should know the answer:
What is the APR on the mortgage?
In order to effectively compare different offers, you must know the APR on each. The interest rate that lenders usually quote on advertisements is not APR, which means that the advertisement interest rate only includes the fee lenders charge you for lending their money. The closing costs, administration fees, origination fees etc. are not included in that rate. APR, however, does include them and that is why you should us APR to compare different offers.
What is the breakdown of every payment?
Sometimes, even APR will not include all the charges you are expected to pay. So to avoid that you should ask for a dollar figure breakdown of all payments you would be expected to pay over the course of the loan.
Do you need to lock the interest rate?
To "lock" or "fix" the interest rate, your loan officer needs a commitment from you, and if that doesn't happen the interest rate on your offer might go up. Ask your lender, whether you need to officially lock your loan and if that requires a payment.
Is there a prepayment penalty?
Some lenders apply a prepayment penalty on their loans that can be up to thousands of dollars. It basically states that if you pay back your loan before a certain period you'll be charged a fine. If you don't plan in staying your house for too long; you should know if your mortgage agreement has a prepayment penalty clause or not.
How long does the loan application processing take?
It is important to know the processing times of different lenders because that can affect interest rates. If rates are expected to go up and the processing time is, say more than a month, then you should look to lock your interest rate.
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