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Once you've narrowed the lender field to
a short list of finalists, it's time to compare their offers.
| Here are the 10 key questions
to ask at application time to help you find the best overall
mortgage loan. If you have already selected a lender and
are ready to apply, make sure you have the answers to
these questions first. |
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1. What is
the interest rate on this mortgage?
To determine exactly what you'll pay over the term of the loan,
you need to know the rate. Rates change quickly, and if your credit
is less than perfect, you may not be offered the lender's lowest
figure.
To effectively compare different lenders' programs,
ask for the annual percentage rate (APR) of the mortgage interest,
which is generally higher than the initial quoted rate because it
includes some fees. But beware: the APR found in advertisements
can be misleading. Mortgage lenders don't always include all the
fees they charge in the calculation that determines APR, so customers
who use that figure to shop rather than an itemized breakdown of
rates, points and fees may end up comparing apples to oranges.
2.
How many discount and origination points will I pay?
Lenders may charge prepaid mortgage interest points to lower your
interest rate or other points that have no benefit to you at all.
Find out how many you'll be expected to pay and which kind of points
they will be.
3.
What are the closing costs?
Mortgages come with fees for various services provided by lenders
and other parties involved in the transaction. You want to know
what those fees will be as early as possible. Lenders are required
to provide a written good faith estimate of closing costs within
three days of receiving a loan application.
4.
When can I lock the interest rate and what will it cost me to do
so?
Your interest rate might fluctuate between the time you apply and
closing. To prevent it from going up, you may want to lock the rate,
and even points, for a specified period. Ask your lender if lock
fees apply. Also, find out what the experts are expecting rates
to do, read Rate Trend Index.
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Chapter 4: Paperwork and fees
