Link to this page Print RSS  

7 Questions All First Time Home Buyers Must Ask Their Lenders

Many first time home buyers feel overwhelmed by the mortgage application process.  They aren't sure where to go for advice or what they need to know in order to get the home purchase mortgage that best meets their needs.  If you're in this position, make sure to ask your lender the following questions.

1.  How long will it take to process my mortgage?  This will provide you a timeline of steps to take when purchasing your home.  If you've already optioned a home and need approval quickly, you 'll want to make sure your lender can deliver on time before you start the process.  Of course, the best thing to do is to get prequalified by the lender of your choice before you even begin house hunting.

2.  What will my interest rate be?  Make sure to ask it this way.  If you ask about interest rates in general, your lender my quote you a rate that you don't in fact qualify for.  Your credit score will help determine this.  Make sure you check your credit yourself before you approach a lender or broker for a loan.

3.  Will this interest rate change at all during the course of the loan?  This is one of the most important questions to ask.  Life is good if you get a low rate, but if that rate is subject to change after a set period of time, it's not such a great deal after all.  Try to get a fixed rate loan.  Though fixed rate loans are not as cheap as adjustable rate mortgages, they still come at some of the lowest mortgage rates available, and it's worth the money you save in the long run.

4.  Is there an early repayment penalty?  If you think you might want to pay your loan off early and save money, make sure you're aren't going to face early repayment penalties.  Lenders make money by charging interest, and when loans get paid off early, that interest doesn't accrue.  Some lenders mitigate this loss by charging early repayment penalties.  If you think there's even a slight chance you might pay your mortgage off early, you don't want this.

5.  Are there any tie-ins?  A tie-in is a clause in the mortgage contract that "ties" you to an additional service.  For example, the lender may require you to purchase homeowner's insurance from a specific insurance company or require you to work with a specific title company or escrow firm.  Tie-ins are not inherently bad, but they may cost you extra money.  Watch out for them.

6.  Will my loan be resold?  Many lenders sell the loans that they originate to other banks and financial institutions.  This is not a bad thing and doesn't necessarily affect you in any way, but if you ever want to contact your mortgage holder, you'll have to follow a paper trail to get to the current owner.  Find out from your lender whether your loan will be sold and who it will likely be sold to.  You'll save yourself a headache down the road.

7.  What are the closing costs?  Your lender must provide you with a good faith estimate of the closing fees associated with the loan.  Make sure you know what these costs will be and what they're for.  More importantly, make sure you can afford them.  Many first time home buyers forget that money is required at the closing table.  Understand the costs before you get there.

Link to this page Print RSS