Another key to obtaining the best possible mortgage is to realize how much of a down payment you can afford. Make sure when speaking to lenders or brokers regarding mortgages you find out all the costs involved in the loan. In order to proper comparative research, below are some key questions to ask:
- What is the term of the loan?
What type of loan?
- What is the same loan amount?
Knowing just the monthly payment amount or the interest rate is not enough.
Below is information that is important to get from each lender and broker:
- Find out the current mortgage interest rates. Ask if the rates are the lowest for that day or week.
- Find out if the rate is fixed or adjustable
- Is the rate they are quoting for an adjustable-rate loan? How will your rate and loan payment vary?
- What is the annual percentage rate (APR)?
These are fees paid to the lender or broker for the loan and are often linked to the interest rate; usually the more points you pay, the lower the rate.
- Check the internet or your local newspaper for current information regarding rates and points.
- To give you an idea of how points will affect you financially, ask that points to be quoted as a dollar amount. This will let you know exactly how much you have to pay.
There are often many fees involved with a home loan. Fees may include; loan origination or underwriting fees, broker fees, and transaction, settlement, and closing costs. Ask the lender or broker for an estimate of these fees. Do not forget many of these fees are negotiable. Also, ask when the payment of these fees is due. Some fees are paid at the time of the loan application, while others are due at closing.
A few questions to ask regarding fees:
- What does each fee include? Are they lumped into one fee or separated?
- Make sure you understand each fee. If you do not, ask for an explanation.
Understanding Down Payments and Private Mortgage Insurance
Historically, some lenders require 20% of the home’s purchase price as a down payment. Today, many lenders now offer loans that require less than 20% down payment.
Remember, that many times when a 20% down payment is not made, the lender usually requires the home buyer to purchase private mortgage insurance (PMI).
Government assisted programs such as Federal Housing Administration (FHA), Veterans Administration (VA), or Rural Development Services may require substantially smaller down payment requirements than a conventional loan.
- Find out the down payment requirements from each lender. Ask what you need to do to verify that funds for your down payment are available.
- Ask about any special programs that may be available.
If you are required to carry PMI for your loan:
- Find out the total cost of the insurance.
- Make sure to get your monthly payment total with the PMI premium included.