When the borrowers apply for a mortgage for the first time, their minds are full of questions about mortgage. They want to have a basic idea about mortgage, and what it is really going to cost them. In this article, you will find the most common types of mortgage questions that a borrower should ask a lender.
Mortgage questions
The most common types of mortgage questions that the borrowers should ask the lenders are given below:
1. Which type of loan is best?? Generally, the lenders gather information about the borrowers before offering a loan. However, the borrower should ask the lender to explain the pros and cons of different types of mortgage loans (fixed-rate mortgage, adjustable-rate mortgage, interest-only mortgage, negative-amortization mortgage) so that they are able to make the best deal.
2. What is the interest rate & annual percentage rate?
If the interest rate of the mortgage is adjustable, then the borrower must ask about these things: adjustment frequency, margin, index, highest rate (cap). ?The annual percentage rate (APR) is obtained by a difficult calculation. This is calculated by dividing the interest rate and all the other relevant lender fees by the loan’s term. However, the borrower should know that there is no method by which one can calculate the APR for an adjustable loan.
3. What are all the costs??The cost of a mortgage loan include fees that go into the lender’s pocket as well as third-party vendor fees such as: appraisal, credit report, taxes, escrow fees, pest inspection reports, lender’s title policy, recording fees, etc. According to federal law, the lender should give an estimate of these fees to the borrower.
4. Is there a prepayment penalty?? Sometimes, the borrowers try to pay the loan off early through refinancing or by selling a property. Therefore, the borrowers should ask the lenders about the prepayment penalty. In some states, prepayment penalty is not allowed any more. Generally, prepayment penalties allow the lender to collect an extra six months of “unearned interest”. The borrowers should ask the following questions: a) How much is the prepayment penalty? b) What are the terms of the prepayment?
However, if the lender can’t give suitable answers to these mortgage questions then the borrower should find another lender.
- Contributed by MortgageFit Community Member
