It is extremely important to ask your lender some important questions before committing to a loan. The better the lender knows about you, the better assistance, advice and information you can expect from him in return.
Below mentioned are some common questions you need to ask your potential mortgage lender before commuting to a loan.
How much I need to borrow to buy a home?
Lenders may consider your income level, your employment status and your credit history to determine how much amount you need to borrow. The better the lender knows about you, the better assistance, advice and information you can expect from him in return. Special government-sponsored mortgage programs may be available for military veterans and first-time homebuyers. Ask your lender what you may be eligible for before applying.
How much money you need to put down?
Always try to make at least 20% down payment to get the best rate and terms for your loan. While a reduced down payment will not necessarily disqualify you, there is a possibility that if your down payment is less than 20 percent, a monthly private mortgage insurance (PMI) payment will be added. Other factors, such as your interest rate, terms and monthly payments, will also be influenced by your down payment. Ask your lender for more data about the minimum down payment needed for your loan and if you may be eligible for any down payment or cost-saving aid programs and decide what’s correct for you.
What will be the interest rate?
This is the one of the benchmark questions asked by every borrower. Majority of lenders advertise two types of interest rates. The former is usually the base interest rate and the latter is Annual percentage rate (APR) which accounts for interest rate and other loan related charges. This APR provides you an opportunity to do apples to apples comparison between the different lenders.
Is it a fixed rate or an adjustable rate mortgage?
Fixed rate mortgages remain fixed throughout the loan term. In fixed rate loans, the monthly down payment stays the same over the length of the loan typically upto a 15-30 year term. On the other hand, in adjustable rate mortgages, the interest rate changes at specified intervals and your payments go up and down based on the market.
When can you lock in the interest rate?
Interest rates mostly fluctuate. Locking it really pays off well. Most lenders have a tendency to lock low interest rates for shorter period of time and large interest rates for longer periods of time. So, it is very important to know when can you lock a particular interest rate and how long will be the locking period.