Home Buyer College
Four Important Questions To Ask Your Mortgage Lender Before You Sign Any Of Their Documents...
1. Do you have a variety of loan programs to fit my cash flow and expected length of ownership needs?
If you are going to live in your new home for less than five years, you may want to consider an adjustable rate mortgage or "ARM."
With an ARM your payments will be lower, but they will go up according to the terms of the loan. Most people aren't aware that with a standard 30-year mortgage they'll be paying 2 1/2 times the amount of the mortgage in payments.
If you are going to live in your new home for over five years, a traditional fixed-rate mortgage may be a better deal.
2. Do you offer written mortgage pre-approvals, not just pre-qualifications?
A "pre-qualification" is usually a lender's opinion of your eligibility for a loan. If you ask to be pre-approved, the lender will actually submit your job and credit history to an underwriter and get a conditional approval for a loan and a loan commitment.
The advantage of having a pre-approval is that it will make your offer to buy a home stronger and it will usually allow you to close the deal faster.
3. Do you have the ability to handle difficult credit history?
Many lenders will only work with you if you have perfect credit, and if a problem comes up, they won't help you. Lenders look at your credit history to figure out how much they will lend you and how much they will charge you to lend it.
Before you make an offer on a home, make sure your lender has reviewed and received approval for you and your specific credit history.
4. Is the rate that you quoted me the rate I will get at closing?
Many lenders advertise their rates in the paper and in homes magazines. These are what are called "Teaser Rates" in the industry. The name says it all.
Lenders will lock in points for 45-60 days. If the interest rates are dropping, the lender will work quickly to close at the locked-in rate.
After they've got you committed to using them, many lenders then tell you what the "real" rate will be. By this time, it's too late for you to do anything about it.