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Frequently Asked Questions (FAQ) on Mortgages

You've been house hunting for a while now, but it's about to pay off. The list of potential homes has been dwindled down to a single home. It got everything you want in a home and is located in a great neighborhood. Now all you have to do is make sure you can afford the property. However this might not be as simple as you think.

There is a lot to be done when you secure a mortgage. You should talk to a few lenders to make sure you are getting the best deal available to you. You will also want to decide on the actual type of mortgage that will best suit your home buying situation. Each type of mortgage has its own pros and cons. Consider the following frequently asked questions when you are deciding on a specific lender.

1. What will the rate of my loan be?

It depends on what type of mortgage you end up getting. It also depends on the current state of the market when you talk out the loan. Your annual percentage rate (APR) is a good gauge of what you will actually be paying over the course of the loan. Often times the APR is higher that the original quote. The lender's fees will also be added into the final amount. Many lenders don't add their fees into the calculated APR. This can become problematic if you are close to you limit and then the lender's fees push you over the edge. Make sure you make a detailed list of all the fees, points, and rates associated with the loan to get more precise number.

2. How do I know what I will have to pay in origination and discount points?

Some lenders can lower your rates by charging you prepaid mortgage interest points. There are other points that the lender will use that don't give you any advantages. You will want to ask your lender for an itemized list of what kind of points is being used and their total number. This will let you know what points are working to your benefit and which ones are not.

3. When will I know the closing costs? Will I need a good faith estimate before the closing date?

All mortgages come with fees. These fees are used to pay the lender for the services they provided, as well as anyone else associated with the process. You will want to know these fees as soon as you can. This will help you better allocate your finances before closing. Most lenders will give you a good faith estimate. This written document details the closing costs. You should be able to get it within 3 days after obtaining the application for the loan. You might not want to go with a lender that refuses to give you a good faith estimate.

4. What does it cost to lock in an interest rate? When will I be able to do this?

There is a chance that your final interest rate will not be the same at the time of closing as it was when you applied for the loan. You might be able to lock into a rate at a specific time. Your lender might be able to tell you which way the market is leaning. This could let you know if you should lock in now because rates are likely to rise, or wait for a while since they look like they are dropping. Check out the affiliated points as well. Talk to your lender and see if this s a good thing for you to do. Also you will want to see what fees are associated with locking into a specific rate.

5. Does the loan have a prepayment penalty?

You will want to know if your loan has a prepayment penalty. These penalties can be sustained by any number of activates associated with the mortgage. If your loan does have one, check to see what it is because the penalty can vary a lot. Sometimes you will have to pay 1% of the mortgage amount, where as other times the penalty can be as much as 6 month's interest.

Know what, if any, prepayment penalties are attached with your mortgage. Know what the length of each one is and how it is determined. Sometimes if a buyer assumes these penalties, the lender will lower the interest rate on the loan.

6. How much of a down payment is needed on the loan?

The down payment can determine the terms and rate of your mortgage loan. Usually the down payment is between 5% and 20% of the property's price. By putting down a larger down payment, you can sometimes reduce you interest rate and shorten the term of the loan. However if you are not able to meet the minimum amount, you might want need to obtain private mortgage insurance.

7. What do I need to do to qualify for this mortgage loan?

Qualification requirements on loans vary. The type of loan dictates what you need to qualify. Some loan types are harder to qualify for than others. The main requirements in qualification many times look at your assets, credit history, employment status, liabilities, and income. There can be other stipulations as well. There are some special loans for veterans or first-time home buyers. You should check with you lender to see which type of loans you quality for.

8. What documents will I need to have to secure a loan?

You will usually need to provide the lender with a list of your assets as well as proof of income. Depending on the situation, they can also ask for additional statements proving your financial situation. Some buyers will qualify for loans that do not require documentation. These loans are called "no-doc". They tend to have high rates and require a large down payment. 

9. How long will the loan application process take to complete?

Usually the process can take anywhere between 45 days and 60 days. The length of the process is based on the many factors such as waiting for the property's value appraisal as well as verifying your financial situation. Other factors might affect the length of completion. If there is heavy lending activity at the time of your application or your situation is complex, this can delay the process. In addition holiday seasons are a factor to consider.

10. What delays can I expect with the approval of my loan?

Unless there's a problem verifying your financial authenticity, the application process should not really have any delays. It is very important to disclose any changes in your financial situation to the lender as some things have the potential to alter the course of your loan approval.