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Five Questions You Must Ask Your Mortgage Broker – Before You Apply

9-20-2010

The following are five critical questions you must ask your mortgage broker before you pursue a loan for your home purchase.

1.  What mortgage interest rates can you offer?

This is the first question you must ask.  Why?  It's simple.  The interest rate on your mortgage is one of the critical aspects of the loan.  A tiny difference in the interest rate now may cost you tens of thousands of dollars more over the loan term.  Ask your lender what mortgage rates he or she is able to offer.  If you're checking out multiple lenders, compare mortgage rates to find the best deal.

2. Can you lock the mortgage rate?  If so, for how long?

Mortgage rates can change from day to day, and the rate your broker offered you a week ago may not be the rate you'll get when you make it to the closing table.  Not unless you lock in the rate for a specified time.  Most lenders will do this once a deal is in the works.  With a rate lock, your lender agrees to provide you at closing the rate that you were offered originally, regardless of whether interest rates increase or decrease in the meantime.  Ask your mortgage broker if this is an option.  If it isn't, be wary.

3. How will the down payment amount affect the mortgage?

No down payment amount is set in stone.  Ask your lender if a higher down payment will get you a lower rate.  More importantly, ask if a lower down payment force you to accept a higher rate.  If you're getting an FHA mortgage or a VA home loan, your down payment will likely be minimal or nonexistent.  But this will affect other costs related to the loan, such as the interest rate and mortgage insurance premiums.  Ask your lender how a higher or lower down payment will change things.

4. What closing costs are required?

Closing costs sneak up on many homeowners who don't realize that there are added costs beyond the down payment.  Don't let this catch you by surprise.  Ask your mortgage broker as earlier as possible what these fees will include, and plan accordingly.

5. What are the prepayment penalties?

If you plan to pay off your mortgage early, make sure you're prepared for the consequences.  Most all mortgages come with an early prepayment penalty attached.  These penalties come in numerous varieties.  Find out which ones apply to your loan and how they will affect you.

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