7 Questions to Ask Your First Mortgage Company
For a first time home buyer, finding your best home mortgage can be a difficult process. Here are 7 Questions to Ask Your First Mortgage Company.
1. What is your interest rate?
It is good to get a low rate of interest, but you have to ensure that your first mortgage company isn’t quoting high closing costs in order to offset the low rate of interest. Also, inquire whether it is a variable rate (also known as an adjustable rate) or a fixed rate. In variable rate, rates of mortgages fluctuate over time, whereas in a fixed rate (FRM), interest rates remain unchanged through out the term of the mortgage.
2. What is your Annual Percentage Rate?
Normally, an APR takes into consideration your lenders closing costs and spreads it over the mortgage period. It is an ideal instrument for comparing home mortgages than just taking into consideration the rate of interest alone, particularly in the case of FRM.
3. What will be Your Total Closing Costs?
It is important to note that, not all closing costs (loan processing costs) are incorporated in the calculation of APR, so always ask your lender about the things that are incorporated in the APR calculation.
4. Can I pay the loan off early?
Always ask your first mortgage company about the prepayment penalty stipulation before applying for the mortgage loan. Chances are, in the future, rates of interest can go down and you may want to refinance in order to take advantage of reduced rates of interest.
5. What about PMI?
Private mortgage insurance is necessary on most mortgages if you’re planning to contribute a down payment less than twenty percent of the mortgage amount. Also you must inquire if it will automatically rescind when your equity reaches about twenty-two percent of the appraised home value.
6. Is there a charge for locking rates?
Because of the fluctuating nature of interest rates, your first mortgage company should allow you to lock-in the rates of interest. One important thing to consider is that the lock-in deal must always be in writing.
7. How long will the loan take to be processed?
A promise that the mortgage will be quickly processed may give the buyer more bargaining power. For the same explanation, it is good to be pre-approved from lenders.
The answers to these key questions could connote the difference between ultimately owning and not owning a home. Download "The Essential Guide to Buying Your First Home" at the button below to learn more about the buying process.
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