Questions To Ask Your Lender

Your lender should advise you on the different types of loans available and the process required to obtain financing for your new home. Below are some questions you will want to ask as part of your decision making process before you decide on a particular loan.

With all loan types be sure to ask:

• What documents will the lender require from you to obtain a loan?
• What types of loans are there?
• Would a “first” and “second” loan be of value in your situation?
• What is the difference between an adjustable rate and fixed rate loan?
• What is the interest rate on various loans that you are interested in?
• What is “locking in” an interest rate and how long is the “lock in” period?
• Can you get a lower interest rate after locking in if the rates go down?
• What fees are charged by the lender to obtain the loan?
• What fees need to be paid before the close of escrow and what fees are paid at the close of escrow?
• When will you need to have funds available for your down payment?
• Will you have to pay “points” to obtain your loan? A lender may want to charge points for you to obtain the loan. A “point” is 1% of the loan amount.
• Is there a pre-payment penalty if you pay off your loan early? Please note that about 80% of all loans are paid off early because of refinancing or selling of the home after a few years of ownership.
• Will the lender require “mortgage insurance”? Mortgage insurance protects the lender if you default on your loan. It does not protect your interest in the property.
• How late can a payment be made before a late charge is assessed?
• What will happen if a payment is missed?

With adjustable rate loans be sure to ask:

• How often can the rate be adjusted?
• What is the maximum the rate can change at any one time?
• What is the maximum rate that can charged over the life of the loan?
• Can the rate go down?
• Can the term of the loan be extended?

Always ask for a written estimate of the loan fees and payment amounts for any loans that you are considering.