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As one goes through the process of home buying, you’ll probably realize there are several types of mortgages and lenders. It’s important that you find the right type of mortgage that best fits your requirement.
Here are a few questions you may ask a potential mortgage lender
- Know what types of loans do they offer
Some common loan terms are 30 years and 15 years, which is the time that you would take to pay off your loan with a regular monthly principal and interest payment.
Interest rates are of 2 types – a fixed rate where the interest rate will never change during your loan term.
And an adjustable-rate loan, which after the introductory period, the interest may go up or down depending on the market condition, and thereby may increase your monthly principal and interest payment.
- Do they have any special programs that can help homebuyers?
For a first-time homebuyer, there are many federal and local programs that may help the homebuyer to put together money for a down payment in order to help them purchase a home.
A potential buyer may check with the lender if they’re eligible for these programs. Many a time lenders may offer their own lower-down-payment mortgage options or assist with the down payment or closing costs.
- What sort of interest rate can the home buyer qualify for? What other factors go into their APR?
It is very important to know that interest rate and annual percentage rate, or APR, are two different things.
The APR is the total loan cost that includes the interest rate, closing costs, and points.
Lenders may be able to give a rough estimate of the interest rate and APR on different types of loans by getting some basic information (approximate) on the borrower’s credit score and the type of loan they’re considering.
The actual interest rate and APR will not be known until the borrower submits a formal application.
- What are the fees they charge for the lending process?
Some common fees are origination charges, which is an up-front fee for making the loan. It is very important to ask about any prepayment penalties for paying off the mortgage early.
By asking these questions a borrower gets a fair idea of the products, options, and services that are offered by the lender and it will help in making the mortgage application experience easier.
Reference Source: Wells Fargo
