Today’s mortgage market is very complex, with more choices than ever before, innovative new features being introduced every day, and unexpected conditions and fees hidden in the fine print. The best way to protect yourself is to go through every item on this checklist with each lender BEFORE you go any farther. Let’s start with the first five in this post, and then we’ll wrap things up on my next post.
What’s the APR (annual percentage rate) on this mortgage? Be skeptical of the first rate you’re quoted. Always ask if it’s the annual percentage rate. The APR is usually higher because it includes the additional fees involved in procuring a loan. And don’t always believe the APR quoted in ads. Lenders often use bait and switch tactics: they’ll quote a low rate to get you in the door, but it may not include all the points and fees, or it may be almost impossible to qualify for.
How much of a down payment will I need? Most mortgages require a down payment of somewhere between 5% and 20% of the loan amount. The higher your down payment, the more attractive your rate and terms will be. However, you may not be able to afford a high down payment. If you can’t manage a down payment of 20% or more, your mortgage is required to be covered by private mortgage insurance (PMI), which will involve paying an insurance premium.
How much extra will it cost to lock in my interest rate? As you know, mortgage rates are changing all the time. If rates rise between the time you apply and your closing date, you can pay thousands of dollars extra over the life of your mortgage. Most lenders will let you lock in the rate you discuss at the time you apply so there are no surprises later. But there’s often a fee for this, so find out how much it might cost. We do not charge a fee to lock in an interest rate that is up to 60 days.
Are you going to charge any discount points? Some lenders charge prepaid mortgage interest points that can have a big effect on the cost of your loan. Ask for full details.
What are the guidelines I need to meet in order to qualify for this mortgage? Every mortgage has requirements that relate to your employment, income, down payment, credit history, assets and liabilities. First-time home buyer programs, VA loans and other government-sponsored mortgage programs typically offer easier qualifying guidelines than conventional loans.
OK, stay tuned for my next post, where I’ll give you the final five…
Lester Bleich, New York State Licensed Mortgage Loan Originator 