October 2nd, 2014 10:44 PM by Robin Bain
The following information may seem basic or elementary to many; after all, this may not be “your first rodeo.” However, federal guidelines have changed during recent years, and, quite frankly, you’d be surprised how little information purchasers request when making this major investment. Most — without exception, whether purchasing a first, second or vacation home, whether the home costs $100,000 or $500,000 without respect to education level or income — ask three things: what is my down payment? … my interest rate? … my closing costs? Though most buyers leave their closing with literally pounds of paperwork, few read the documents they sign … in fact, the average closing takes only 30 to 45 minutes.
While a good mortgage lender will streamline the process, recognizing the value of their clients’ time, it’s still important to ask several key questions. Before you commit to a lender, ask these nine questions. If you don’t like the answers you receive, continue shopping for a loan until you find a mortgage lender who is knowledgeable, forthcoming and experienced and with whom you feel comfortable.
Reputable lenders will get to know you before throwing out loan options. He should ask questions like:
• What is your comfort level in regards to your payment?• What are your long- and short-term equity objectives?• What do you hope to accomplish with this loan?
Choose a lender who gathers enough information from you before suggesting a certain type of loan. Don’t be afraid to ask a lender to explain the pros and cons about:
• Fixed-rate loans• Adjustable-rate loans• Interest-only loans
The annual percentage rate (APR) is derived by a complex calculation that includes the interest rate and all the other related lender fees divided by the loan’s total term. APR takes into account of the total fees that are a result of financing (in a cash transaction, the fees would not exist). Many buyers may not realize that one must pay more to obtain a lower interest rate; you can pay more in discount points, depending on the market, to buy down your interest rate. In some cases, it does not make sense to buy down your interest rate, especially if the market is down and if you do not expect to stay in the home for a short period of time. It may look good to see the lower interest rate on the front end, but may not make sense in the long term.
Each “point” is equal to 1 percent of the loan amount. Therefore, two points on a $100,000 loan cost $2,000. Points “buy down” the interest rate, meaning the more points you pay, the lower your interest rate. Points are also tax deductible — even if the seller pays some or all of the points. Sometimes lenders charge origination fees in addition to points.
All the costs of a loan include not only fees that go into a lender’s pocket, but also related third-party vendor fees. An estimate of these fees constitutes the Good Faith Estimate (GFE), which the lender is required by federal law to give the borrower. According to the Real Estate Settlement and Procedures Act (RESPA), lenders have three days after completion of the loan to provide the GFE, containing all the costs of the loan, to the potential buyer
A lender can’t guarantee a GFE, because it is exactly what it says, a good faith estimate.
Interest rates fluctuate and change daily. If for any reason the interest rates are increasing or decreasing, a lock to the loan may be placed. Lenders typically charge zero to one point to lock the loan rate, so please ask the lender.
Selling your home or refinancing your mortgage can constitute prepayment. In some states, prepayment penalties are no longer allowed. Depending on the products and the lender, they still may have prepayment penalties if you refinance or close out of your loan before a specific time frame. Please ask the lender.
The average loan processing time periods fall between 21 to 45 days depending on the type of loan product that is chosen. Be certain to ask the anticipated turnaround time for the specific type of loan you’re obtaining and what obstacles could hold up closing?
It is not uncommon … often loans are sold to other investors or other financial institutions that service the loan. The question is: once I have closed this loan with you, are you the lender that I will be making my payments to? If not, do you know who that institution will be?
Some lenders can’t answer that question right off, because they have a group of investors or institutions they use and this information is not known until 30 to 60 days from closing. The lender you start out with may not be the company you end up with; so please ask the lender for the name and phone number of the person you should call with questions after closing, if that is available. Welcome to Premiere Mortgage Services, Inc., where you’ll find the best refinance rates and a loan program that's best for you. We’re Robin and Dana Bain, and we provide New Hampshire and Massachusetts mortgage loans for home purchases and refinancing.