Shopping For Mortgage Quotes
Whether you are a first time home buyer or looking to refinance your mortgage, when it's time to make a decision you have to assure yourself you have explored your options thoroughly when it comes to committing yourself to a long term financial responsibility such as a mortgage loan product.
Just like any other product where there is a supply and demand business model, there is also price competition in the mortgage industry, there are lenders who are simply providing better rates and at better conditions - or lenders that provide good rates with less better conditions.
For this reason it's very important you do your due diligence before you commit yourself to a long term responsibility that a mortgage product represents, obtaining mortgage quotes from mortgage companies and mortgage lenders is just the first step in the process.
Information on Mortgage Comparison Points, What To Ask Mortgage Lenders?
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When you read the following points, you might think you are about to give your prospect mortgage lender the third degree...guess what? - You Are!
And you don't have to feel guilty about it, this is a big step in your life so you have every right to present your list of questions to enable yourself to obtain the information you need to make an informed decision.
You could send a list of questions by email to the representative of the mortgage company or lender you have contact with and use that to compare mortgage quotes and the associated terms and conditions, instead of asking the same questions over and over again.
1: What Is The Annual Percentage Rate? (APR)
First things first, the most obvious question to start out with, the associated rate of the loan.
Because you want to know the complete costs associated with a loan you ask for the annual percentage rate, the APR of the loan. Since the APR can consist of different interest costs and fees it's advisable to request an itemized list to review how the APR is calculated.
Then when you compare mortgage quotes you'll have a better way of telling which quote is more attractive, because you have a complete overview of the associated costs and you're not being presented with any hidden costs.
Know That:
* For adjustable loans it's not possible to calculate APR correctly
* There is a possibility the APR given by a mortgage lender may not always be correctly calculated.
For adjustable interest rates ask more about:
* Maximum annual adjustment
* Adjustment frequency
* Margin
* Index
* Caps to protect you form large interest rate increases
* When rates go down, will your loan payment also go down?
2: Ask If The Quoted Rate is Fixed or Adjustable
With adjustable loans if the interest rate goes up, generally so does your monthly payments.
Very important to make sure where you stand on a fixed or adjustable loan, an adjustbale rate loan has its advantages, but also its downsides...make sure to verify with a qualified financial advisor what would work for you for your personal financial situation.
3: Points Being Charged?
Paying for points upfront can lower your rate, these points are paid to your mortgage lender or broker, in most cases the more points you pay the lower your rate.
Points known as origination points may also something you may be charged with, this is regarded as an administrative fee for the application process, a different type of points system that have different outcomes towards your interest rate, make sure to verify with your mortgage lender about this difference.
4: Can The Interest Rate Be Locked?
During the time you're applying for the loan and actually closing the loan the interest rate may go up, there is a possibility where a mortgage lender lets you lock in the interest rate during the time of the application, so you can be assured you'll close your mortgage on the interest rate at the time you went through your application.
There may be fees involved, but it may be worth it should rates go up, make sure to ask about the possibility to lock in points right away as well.
5: Closing Costs and Associated Fees?
You can ask each mortgage lender if they can provide a good faith estimate for the closing costs.
Mortgages often come with a list of fees, "loan origination", "underwriting fees", "broker fees" and "settlement and closing costs" and other third party vendor fees.
These fees may or may not be negotiable so use this to your advantage.
Know that lenders are required by law to provide one within three days of your application.
The Real Estate Settlement and Procedures Act, (RESPA) requires that a Good Faith Estimate (GFE) is provided within three days
Certain fees for a credit report, loan application and property appraisal may need to be paid upfront.
6: Ask About Prepayment Penalties!
If you pay off the loan early, lenders could force a prepayment penalty.
Even though some states do not allow prepayment penalties anymore, it's advisable to ask about it to prevent being confronted with unwanted surprises.
Ask how much the prepayment penalty is, ask about the terms of the prepayment penalty.
Negotiating On Your Loan Fees.
Overage: That is a key element you can base your negotiations on so you spend less money.
So what is it? - the difference between the lowest and highest available price for a loan product, the highest meaning what you as the borrower is willing to pay and the lowest what the lender is willing to accept.
Other borrowers may receive different prices even if the loan qualifications are the same, the difference is where loan officers and brokers make a profit, therefor you can negotiate on the various elements that make up for the "Overage": rates, points, fees....or better said you should negotiate!
