Saturday, November 2, 2013
Home Finance - 20 Questions For Your Lender
Warning! Home finance has blossomed into an incredibly diverse and complicated industry. This is good and bad. There are at least a hundred ways to borrow the money for your next home now. There are also dozens of ways for lenders to take advantage of you, from hidden charges to prepayment penalties and more.Let your lender explain all the various home loans and home finance options available. However, when you finally decide on a product you like, ask as many of the following as are relevant to your loan. These are the questions that will protect you.Home Finance - Questions For The Lender- What is the interest rate?- What is the APR (annual percentage rate; includes fees, points and mortgage insurance)?- What is the initial rate (if it is an ARM - adjustable rate mortgage)?- What is the highest the rate can go to next year (ARM)?- What are the annual and lifetime caps on the interest rate and payment (ARM)?- How often is the rate or payment adjusted, and when (ARM)?- What index is the rate based on (ARM)?- What margin is added to the index (ARM - it might be the index plus 3%, for example)?- Is credit life insurance required (this pays off the loan if you die)?- How much would the payment be without it?- Can any of the fees or costs be waived?- Is there a prepayment penalty?- How much is the prepayment penalty?- For how long is the penalty in force?- Are extra principal payments allowed?- Is an interest rate lock-in available? (guarantees interest rate for a time)- Can I have the lock-in in writing?- Is the rate locked in at time of application or time of approval?- If rates drop, can I get a lower rate locked-in?- What inspections and/or surveys are required?- Is a title search and/or title insurance required, and what is the cost?- Can I get an estimate of prepaid amounts that I'll have to pay at closing?- Are there "points," and what will these cost (discount points to reduce interest rate)?- What state taxes, local taxes, stamp taxes and transfer taxes will I have to pay?- Will a flood determination be required (to see if the home needs flood insurance)?- What other costs will there be?- Is there anything else I should know?Lenders may not like getting two dozen questions thrown at them, but you have a right to ask before you agree to a loan. Did you know that a 1% higher interest rate on a $150,000 loan can cost you an extra $30,000 over the years? Home finance can be as important as a good price when it comes to saving money on your home.