QUESTIONS TO ASK WHILE SHOPPING FOR YOUR LOAN
Before you can effectively compare mortgages, there are a number of questions that you need to ask the loan officer. Some are obvious, others are not. Be sure to ask them all.
KINDS OF FINANCING: Fixed? Adjustable? What about government backed programs? Any special deals you should be aware of? Make sure you have the complete picture of the product menu.
INTEREST RATES: Rates differ not only between different types of loans. The same loan at three different lenders could have three different rates.
TERMS: There are options beyond 15 and 30 year terms. Find out how different terms affect interest rates and how they impact the final cost of your home. This is especially important if you plan to be in the home for a long time.
DOWN PAYMENT: What is the minumn required for different loans? Today's down payment can range from as high as the old standard 20 percent to nothing at all in certain programs.
LOAN LIMITS: Many lenders set limits on a loan to value ratio. For example, with an 80 percent loan to value ratio(LTV) you can only borrow $80,000 on a $100,000 home.
LOAN QUALIFICATION: Different lenders may qualify you using different formulas. Make sure you understand how you are being evaluated.
POINTS: Think of these as prepaid interest charged by the lender. One point equals
1 percent of the face amount of your loan. In some cases points are paid up front; in others, they are bundled into the loan. The latter saves you money up front but costs you more over the life of the loan. No-point loans also save you money but lenders usually charge one quarter to one half point more than in the case of loans with points. Be sure to look at what your total costs will be over the life of the loan.
PREPAYMENT PENALTY: If you decide to pay off your mortgage before the term is up, or refinance when the interest rates go down, you may have a prepayment penalty.
SPECIAL DEALS: Some lenders reduce interest rates for customers who avail themselves of other services offered. For example, your bank might take a quarter of a percent point off if you agree to automatic prepayment from your checking account.
TIME TO APPROVAL: Find out how long it will be before you have a decision on whether or not your loan application has been approved by the lender. A week or two is pretty normal.
LOAN COMMITMENT PERIOD: Make sure you know how long your lender's loan commitment is good for. The last thing you need is to decide on a loan amount at a certain rate, find the right home, and discover your interest rates went up in the meantime.
Many lenders offer a lock in program. This means that the lender will guarantee in writing your loan at a certain rate for a certain period of time. Common locks are for 10,12,21,30,45,and 60 day periods. The longer the lock-in the more time you might have to shop and iron out hitches in the loan process. A lender might charge you more in points for a longer lock-in. Then again, a shorter period may be next to useless given the amount of time the loan process can take. The lesson here is to be very clear of what a lock-in offers and does not offer.
Once you have this and other information on various loan programs from different sources, you can make an informed decision as to where to shop for the best mortgage.
Bryan VogtStrano & Associates, Realtors® - GMAC Real Estate
(618) 355-5824
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# posted by
Bryan Vogt @ 11:31 AM
