LESSON 17: 10 QUESTIONS TO ASK AT APPLICATION TIME
In the first few chapters, we talked about how mortgages work and suggested
what kind of loans make the most sense for certain kinds of borrowers.
We've also discussed what to expect when you apply for a loan and
how lenders will qualify you. Now, let's review some of the questions
you should ask when you're shopping for a mortgage. If you've already
chosen a lender and are ready to apply, make sure you have the answers
to these questions first! See
to get a printable version of the lender interview. If you don't
have Adobe Acrobat Reader, it takes just a few minutes to download
this free program. Click on the icon to get Adobe Acrobat Reader.
1. What is the interest
rate on this mortgage?
To know exactly what you'll be paying in interest over the life
of the loan, you need to know the rate. This is the single most
important figure to obtain.
Some people believe the advertised
interest rate is always the interest rate they will get. Rates change
quickly, and if your credit isn't perfect, you won't get the
lender's lowest rate. In addition,
"Be careful of a 'bait and switch.' A company advertises
one APR, but when you go in to apply, it's higher, or they
talk you into another program completely."
Ann G. Riley, Gilpin Mortgage, Wilmington, Del.
2. How many discount
points will I have to pay to get this rate and loan?
As we discussed earlier, lenders can charge points that lower your
interest rate and points that provide no benefit whatsoever to you.
Find out how many you'll be expected to pay for the loan and which
kind of points they'll be.
3. What closing
costs will be charged on this loan and will you provide the
faith estimate" of those costs up front?
Mortgages come with fees for various services that lenders and other
parties involved in the transaction provide. We'll talk more about
these services and how much they cost in Lesson
20. But you need to find out what you'll be charged as early
as possible. Many experts say that you shouldn't use a lender or
broker unless that person will provide a good faith estimate up
front. We'll talk more about this form shortly.
4. When can I lock in the interest
rate and what will it cost me to do so?
The interest rate of the mortgage you're applying for may go up
or down between the time you apply and the time you close. That's
why you may want to lock
in the rate for a specified period of time, rather than let the
until the closing. Be sure to ask the lender if there is any fee
for locking in the rate and whether you can also lock in points.
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