Home Finance – 20 Questions for Your Lender
Let your lender explain all the various home loans and home finance options available. However, when you finally decide on a product you like, ask as many of the following as are relevant to your loan. These are the questions that will protect you.
Home Finance – Questions For The Lender
– What is the interest rate?
– What is the APR (annual percentage rate; includes fees, points and mortgage insurance)?
– What is the initial rate (if it is an ARM – adjustable rate mortgage)?
– What is the highest the rate can go to next year (ARM)?
– What are the annual and lifetime caps on the interest rate and payment (ARM)?
– How often is the rate or payment adjusted, and when (ARM)?
– What index is the rate based on (ARM)?
– What margin is added to the index (ARM – it might be the index plus 3%, for example)?
– Is credit life insurance required (this pays off the loan if you die)?
– How much would the payment be without it?
– Can any of the fees or costs be waived?
– Is there a prepayment penalty?
– How much is the prepayment penalty?
– For how long is the penalty in force?
– Are extra principal payments allowed?
– Is an interest rate lock-in available? (guarantees interest rate for a time)
– Can I have the lock-in in writing?
– Is the rate locked in at time of application or time of approval?
– If rates drop, can I get a lower rate locked-in?
– What inspections and/or surveys are required?
– Is a title search and/or title insurance required, and what is the cost?
– Can I get an estimate of prepaid amounts that I’ll have to pay at closing?
– Are there “points,” and what will these cost (discount points to reduce interest rate)?
– What state taxes, local taxes, stamp taxes and transfer taxes will I have to pay?
– Will a flood determination be required (to see if the home needs flood insurance)?
– What other costs will there be?
– Is there anything else I should know?
Lenders may not like getting two dozen questions thrown at them, but you have a right to ask before you agree to a loan. Did you know that a 1% higher interest rate on a $150,000 loan can cost you an extra $30,000 over the years? Home finance can be as important as a good price when it comes to saving money on your home.