To ensure you make the wisest choice for you loan needs, you need to ask your lender or mortgage broker the following questions: Are you licensed? Who is my lender? Which type of loan works best for me? How do I qualify for a specific loan you recommend? What documents do I need to prepare? What is the applicable Annual Percentage Rate and Interest Rate? What are the other fees and costs involved with the loan? Will you stand by the GFE? Can I take advantage of interest rate locks? Does a prepayment penalty apply if I wish to pay off my loan early? How long shall I wait for the processing of my loan application? How much is the minimum down payment? How much will my monthly amortization be? When is my monthly payment due? How long do I have to repay my loan?
Choosing the best loan product and selecting the right lender or mortgage broker can be a very difficult and confusing task. In order to make the best decision, you need to know how the world of borrowing worksand the role and nature of a lender or mortgage broker. Here are some important questions you need to ask your lender or mortgage broker so you can make better financial decisions:
Are you licensed?
The first thing you need to ask a mortgage broker or lender is if he is licensed by the state or country. You have to ensure the legitimacy of the broker or entity you are working with to make sure that your rights are protected. When doing your broker search through the internet, it will help that you search for licensed brokers or lenders. For example, type ” licensed mortgage broker perth in order to make your search easier. From the advertised license number, you can then confirm with the Department of Consumer and Employment Protection in Australia if the mortgage broker is licensed or not.
Who is my lender?
It is important that you know the difference between a lender and a mortgage broker. A lender is the company that loans you the amount of money you need. Examples of lenders include a mortgage banker, a consumer finance company, and traditional financial institutions or banks. A mortgage broker, on the other hand, is a company that is usually represented by a loan officer who looks for the right lender to answer your needs. If you are dealing with a mortgage broker, you need to ask your loan officer who is really lending you the money.
Which type of loan works best for me?
Your lender or mortgage broker should come up with the best type of loan suited to your needs and your circumstances. After some queries and evaluation, your lender or broker must come up with the best loan solution for you, without forgetting to explain possible loan options available for you.
How do I qualify for a specific loan you recommend?
There are always guidelines that apply to different loans. Ask your mortgage broker or your lender about them so you will know if you are qualified to apply for a particular loan. Qualifying guidelines usually include your credit history, income, assets and liabilities, as well as your past and current employment.
What documents do I need to prepare?
Ask your loan officer what documents you need to prepare for the application process to go smoothly. You are usually required to submit your credit report along with your proof of income and assets.
What is the applicable Annual Percentage Rate and Interest Rate?
It is also a must that you ask your broker or lender the Annual Percentage Rate or APR to know if you can afford to pay your loan. Your APR already includes the Interest Rate. The APR is usually higher than the Interest rate quoted to you since it includes finance charges and fees related to your credit.
What are the other fees and costs involved with the loan?
Determining whether you can afford the loan is way beyond knowing your interest rate and APR. You need to know the other fees involved ,such as discount points and origination fees from your loan and other related costs, including appraisal expenses, taxes, recording fees, escrow, and credit report expenses.
Will you stand by the GFE?
GFE, or good faith estimate, is the sum of all costs related to your loan. This is important to determine how much you really need to spend for your loan. It usually takes the lenders around three days to determine your GFE. If your mortgage broker or lender does not guarantee you the GFE, it is a sign that you need to look for another lender or broker.
Can I take advantage of interest rate locks?
The interest rate of your loan can fluctuate daily. If you feel the need to be protected from interest rate surges, you can ask to lock into you rate. Ask your lender or broker if any fee applies and if all other costs are also covered. Do not forget to further inquire about the period covered for the interest rate lock.
Does a prepayment penalty apply if I wish to pay my loan early?
Some countries and states allow prepayment penalties, while others do not. It is important to ask if you will be penalized for paying off your loan early. If it does, do not forget to inquire how much the penalty is and about the other terms and conditions that apply regarding the penalty.
How long shall I wait for the processing of my loan application?
Time is always of the essence, so take special care to ask how long it will take for your loan to be processed and funded. Loan applications can take from as few as 30 days to as many as 90 days to process. For the loan processing to run smoothly, you need to make sure that you submit the complete and correct information and documents required of you. Ask your lender or broker about possible delays your application, so you can avoid such circumstances.
How much is the minimum down payment?
Interest rates are determined by your down payment. Lower interest rates are usually a result of higher down payments. Most loans require a 20 percent down payment, while others offer lower down payment schemes and depend on your financial circumstances.
How much will my monthly amortization be?
To clearly determine if you can afford to repay the loan over a certain period of time, ask how much you need monthly. Clarify if the monthly amortization includes property insurance and related and necessary costs.
When is my monthly payment due?
To help you plan your budget, especially when you receive your income once a month, you need to know when to pay your monthly mortgage payment. Some lenders and brokers can help you arrange the due date to your advantage during loan application. Furthermore, do not hesitate to ask about the grace period, just in case you cannot pay on time.
How long do I have to repay my loan?
Finally, you need to ask your lender or mortgage broker how long you will be paying for the loan. Most loans are offered in 20, 25, and 30 year terms. The shorter the term, the lower the interest rate and the more you can save on other costs. Your monthly costs, however, will be higher. There are also other loans where monthly amortization for a certain period of time covers only the interest rate and other payments. During the end of the period, a balloon payment, or the principal amount you borrowed less the down payment, will have to be paid,or you will be foreclose on your loan.
It is very important that you understand the nature and the terms and conditions of the loan you are applying for. If you do not ask your lender or mortgage broker the right questions, you just might not make the best decision for your specific needs. Aside from the key questions above, do not hesitate to ask your loan officer any other questions to that will help you make better decisions.