Before you buy your first home, we want you to be prepared so that you can ask all the right questions. Here are 8 important questions you should ask your mortgage broker before submitting your application for a mortgage.
#1: What kind of interest rate can I expect on my mortgage?
Typically, once your broker helps you to find lenders that are willing to work with you and you decide on which lender you’d like to go with, your chosen lender will provide you with an estimate for your mortgage loan. This estimate should provide a breakdown or annual percentage rate (APR) of all costs associated with your mortgage loan, including other fees and charges, points and rate of interest.
#2: Will I pay a certain number of discount or origination points?
You might have to pay discount or origination points, but that really depends on your lender. However, it’s important to remember than paying discount points allows you to prepay your interest, thereby reducing your interest rate. In order to cover originating costs for your loan, you lender may also charge your origination points. Both of which can also be claimed as tax deductions. The purpose of origination points is to cover the cost associated with preparing documents for your loan, checking your credit history, inspecting the property you plan to buy and doing your property appraisal. Here’s how it works:
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1 point = 1% of the amount of your loan
So, if you get a mortgage loan for $200,000, you can expect to pay $2,000.
#3: Will I be provided with an estimate of my closing costs?
Yes, you will receive an estimate which includes your closing costs, since you will be required to pay fees upon closing. Within 3 days of receiving your mortgage application your lender must provide this estimate to you.
#4: Does my loan have a penalty for prepayment?
If you reduce the principal amount of your loan by a certain percentage or if you are refinancing your mortgage, this is an important question to ask. Certain lenders may charge a penalty for prepaying on your mortgage, and specifics can be provided to you. When choosing a loan with this type of penalty, your mortgage broker can use it to your advantage. Your broker can negotiate with the lender to get your interest rate lowered.
#5: Does my loan require a minimum down payment?
This is a fair question, but your down payment requirement is based on a number of factors including your credit score and history and details surrounding your employment. However, a larger down payment is always better because it provides you with a lower interest rate. It’s likely you’ll also find yourself with better terms on your loan too. Down payments of less than 20 percent generally require mortgage insurance, which will make your monthly payments higher.
Although these 5 questions are the most important, there are also a number of other questions you should ask. Want to find out what else you should ask? Speak to an experienced mortgage broker at AKAL Mortgage today.
When we say Yes! We stand behind our promise.
