5 Questions To Ask Your Mortgage Lender

Shopping around for the best mortgage rate and terms can be an overwhelming process, but the time you take to look for the best deal will be well worth it once you find the right one. To help make the process easier, it is a good idea to come armed with a list of questions to ask each lender. Here are the top 5 questions you need to ask in order to effectively narrow down your options.

Which Loan Type is Best for Me?

A reputable lender will take the time to get to know more about you and your financial situation in order to help you determine which type of loan is best for you. Many people don't realize it, but there are actually many different types of loans available. These include fixed-rate loans, adjustable-rate loans, interest-only loans and negative-amortization loans. Be sure to discuss each type of loan with your lender and to explore the pros and cons of each so you can select the one that best suits your needs.

What is the Interest Rate and Annual Percentage Rate on This Loan?

Although it is impossible to calculate your APR rate if you choose an adjustable loan, your lender should be able to tell you your APR on a fixed rate loan. If your interest rate is adjustable, be sure to ask your lender about the adjustment frequency as well as the maximum annual adjustment.

What are the Organization Fees and Discount Points?

When obtaining a mortgage loan, you can purchase "points" that are equal to 1% of the amount of the loan. Therefore, if you are taking out a $100,000 loan and you wish to purchase 2 points, it will cost $2,000. In addition, some lenders charge other fees when selling points. Purchasing these points can be quite advantageous, however, as it allows you to lower your interest rate. It is important to note that the points are not tax deductible, even if the seller helps pay for the points.

What Additional Costs are Associated with the Loan?

You may be surprised by the number of fees that are associated with taking out a mortgage loan. Some of the other fees you may be responsible for paying include:

*Appraisal
*Credit Report
*Escrow
*Lender's Title Policy
*Pest Inspection Reports
*Recording Fees
*Taxes

Federal law requires lenders to provide a Good Faith Estimate, or GFE, of what these fees will equal, so be sure to ask for this information.

Can I Lock on My Loan Rate?

Since interest rates are prone to fluctuating and changing on a regular basis, you might want to lock in your loan rate. Most lenders charge zero to one points to get your rate locked in. So, be sure to ask about the fees that are charged to lock in your rate. You should also ask if the lock in will protect the full cost of the loan and how long your rate will be locked in. In order to keep yourself fully protected, make certain to get the loan lock in writing as well.