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  Mortgage Basics   Chapter 4: Paperwork and fees
Of the documents you receive, the most important is the good-faith estimate of closing costs.
 
   

10 questions to ask your mortgage lender

 

Once you've narrowed the lender field to a short list of finalists, it's time to compare their offers.

10 key questions to ask
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.
1. What is the interest rate on this mortgage?
2. How many discount and origination points will I pay?
3. What are the closing costs?
4. When can I lock the interest rate and what will it cost me to do so?
5. Is there a prepayment penalty on this loan?
6. What is the minimum down payment required for this loan?
7. What are the qualifying guidelines for this loan?
8. What documents will I have to provide?
9. How long will it take to process my loan application?
10. What might delay approval of my loan?

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.

-- Posted: May 1, 2006
 
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