Finding your dream home is great, but chances are you won’t be paying cash for it. That means you’ll need a lender for a home loan. However, before you sign with any home finance provider consider these MUST-ASK questions.
What is the APR (annual percentage rate) when you figure in any fees, points and mortgage insurance?
What is the interest rate?
Are there ‘points’ that need to be paid in order to qualify for the loan and what will these points cost?
If points are required is there a way to avoid them (sometimes by putting down 20%+ you avoid paying points)?
Is the loan an adjustable rate mortgage (ARM) or fixed?
If it’s an ARM loan, when will the rate increase and what will the increase be?
What margin is added to the index of the ARM loan (For instance, your rate could be an index of 5% plus 4%,so what seems like a 5% rate might really end up being 9% total since 5% + 4% =9%)?
When doing an ARM, what are the annual and lifetime caps on the interest rate and payment?
Will credit life insurance be required (to insure that the loan is paid off in the event of your death)?
Is there a prepayment penalty for early payoff and/or are extra principal payments allowed?
If so, how much is that prepayment penalty?
What property inspections,surveys, etc. are required prior to purchase?
Is a good faith estimate available on the rates and any prepaid amounts that will be required at closing?
Is an ‘in writing’ interest rate lock-in available so I’m guaranteed the interest rate quoted for a short time?
Is the quoted rate locked in at the time of the application or time of approval?
If rates drop before I buy,can I get that lower rate instead?
What other costs will there be?
A quality lender will happily answer all of these questions, but you need to be the one to ask. Also don’t be afraid to simply ask, “Is there anything else I should know?” All these questions are important because paying just a 1% higher interest rate on a$150,000 loan can run you another $30,000 by the end of your loan. Could you use an extra $30K? The real question is ‘Who couldn’t?’ So just remember that knowledge isn’t just power… it’s a money saver too.
