Are you in the market for a new mortgage? Whether it’s your first one or you are refinancing again to get a better rate, you will want to make the right decision on a mortgage lender and your loan. By asking the right questions before you sign for your mortgage, you can make informed choices about your mortgage choice.
1. Which Loan Is Best? Different types of mortgages fit different financial needs. After explaining your goals and needs with the lender, ask which loan option is right for you. A good lender will be able to point you toward a loan product that will help you reach your financial goals effectively.
2. What Are the Terms?
Next, ask about the terms of the loan. Particularly, ask about the interest rate and annual percentage rate. The interest rate is fairly straightforward, but the annual percentage rate is more complex. Knowing both of these numbers will give you a better estimate about what the cost of the loan will be.
3. Can You Outline the Costs of the Mortgage?
Mortgages costs are more than just the principal repayment and the interest. You will also need to cover costs such as:
Title search fees
Credit report fees
Private mortgage insurance
Many of these are part of the loan’s closing costs. Closing costs are typically around 2 to 5 percent of your home’s purchase price. You will need to know this number so you can be prepared for your closing date. Some of the fees, like taxes and private mortgage insurance, are part of your monthly payment, but you should still know what they are.
4. What Happens if I Pay It Off Early?
Paying off your loan early almost always makes financial sense, if you can do it, but some mortgage lenders charge hefty penalties for early repayment. Make sure you know if there is a prepayment penalty. If possible, avoid a loan that has one. Keep in mind that some loans with prepayment penalties only apply the penalty to the first few years of the loan. If you move or want to refinance, you will be stuck with the penalty.
5. What Documents Do You Need?
You will need a number of documents to apply for your loan, including proof of your assets and income, your ID, information on your debts and information about your credit history. Each lender will have a slightly different list of required documents, so ask before you head in to apply.
Asking questions will help you as you move forward with the application for your mortgage. It will help you learn which products are best and be prepared for the process ahead. With the right lender and the right information, you will be able to get a mortgage that is the perfect fit.