The main rule: Don't just look at the mortgage interest rate. Take a close look at all the
terms of the mortgage program. Check with several lenders, either directly or through a
mortgage broker. You also can do some comparison shopping yourself on the Web. For more, see
the section on Using the Web to Find a Mortgage.
Below are 10 key questions to ask the mortgage lender or broker. You can use the information
gathered as a basis for comparing loans. In the end, you'll see which loan adds up to the
best deal for your circumstances.
1. How long will it take to process my mortgage loan application?
Usually it takes about 45 to 60 days, although it can take as few as 30 days and as long as
90 days for some transactions. The actual time depends on how quickly the lender can get an
appraisal of the property, a credit report and verification of employment and bank accounts.
2. What documents do I have to provide?
You will need to provide proof of income and assets in order to get a mortgage loan.
Different lenders may require more or less of these documents. See section on Get Your Documents Ready.
3. What are the qualifying guidelines for the particular loan?
The qualifying guidelines can relate to your income, employment, assets and liabilities, and
credit history. Remember some first-time home buyer programs and government-sponsored loans
have easier qualifying guidelines. See section on Low Down-Payment
Programs.
Tip
It's a good idea to know what type of mortgage you want, such as fixed or adjustable rate,
when you start loan shopping. For more, see the section on ARMs Can Be
Tempting, But Uncertain.
4. What is the minimum down payment?
Depending on the amount of the down payment, you can get different interest rates, loan
terms, and avoid private mortgage insurance. Some loans require the standard 20 percent down
payment; others are special low down payment programs. For more, see the sections on The More Money You Put Down, The Lower Your Mortgage Payment and Private Mortgage Insurance (PMI).
5. What is the annual percentage rate of the mortgage interest?
To effectively compare different lenders' programs, ask for the annual percentage rate, or
APR, of the mortgage interest, which is generally higher than the initial quoted rate
because it includes all lenders' fees. For more information, see the section on The Lender's Role, and Your Rights.
6. What are the points or origination fees on the loan, if any?
Points are prepaid mortgage interest, and you may have to pay points at closing in order to
get a lower interest rate on your mortgage loan. For more, see section on Points: Not Always Better Than No Points.
7. Can I lock in the interest rate?
The interest rate of the mortgage you're applying for may go up or down before you close on
the home. That's why it may be wise to lock in the rate for a specified period of time,
rather than let the rate float until the closing. Be sure to ask the lender if there is any
fee for locking in the rate and whether you also can lock in points. To keep up with the
daily changes in rates, check out bankrate.com's nationwide survey of mortgage rates.
8. What is the 'good faith estimate' of closing costs?
Mortgages come with a list of fees. Ask for a list of estimated closing costs before
applying for the loan. See section on the Good Faith Estimate: More
Fees at Closing. Also, remember that some fees must be paid upfront such as the credit
report, property appraisal and loan application fee.
Tip
Find out if you can get a refund of the loan application fee if you change your mind. Some
lenders may only refund the fee if they turn down your application.
9. Is there a prepayment penalty on the loan?
The prepayment question is for all loan shoppers. Find out the duration of any penalty
period and how the fee would be calculated. Some penalties are 1 percent of the loan amount:
others are more complicated. Knowing how much the prepayment penalty would be is important
if you think you will sell the home before the mortgage is paid off, which most homeowners
do.
10. What can delay the approval of my loan?
If you provide the lender with complete, accurate information, everything should go
smoothly. However, there could be a delay if the lender discovers credit problems, which is
why it is critical to get your credit in order. See the bankrate.com special report on credit reports.
Tip
Notify your lender if your personal or financial status changes between the time you submit
an application and the time the loan is funded. If you change jobs, get an increase or
decrease in salary, incur additional debt or change your marital status, you must let the
lender know.