Signing a mortgage for your dream house is a monumental act that can change the course of your life forever. Hence, you have to think long and hard about all the factors that can come into play with your mortgage payments before you actually commit yourself to taking out that housing loan.
Even if you engage the services of a mortgage broker, you shouldn鈥檛 let your guard down just to let the broker do all the thinking and negotiating. In fact, you should have a couple of questions to ask your broker, too, just to ensure that you鈥檙e getting the best deal you can out of your mortgage.
Here are five of the most important questions you have to ask your mortgage broker before signing the mortgage contract:
1. What types of loans are available for me?
There are various types of loans that a lender can offer you for your mortgage. There are fixed-rate loans, interest-only loans, and adjustable-rate loans, among others. You will need to figure out if USDA property eligibility has you qualified to acquire a loan, as each of these loan types has its own advantages and disadvantages, and your broker should be able to walk you through all these before helping you pick the best loan type for your needs.
It also pays to do your own research so you can cross check what your lender/broker is telling you against what you already know about taking out mortgage contracts.
2. Can I get a better rate somewhere else?
There are several factors that come into play in the determination of the interest rate applied to your loan. One such factor is your location. But even within your city, different lenders can offer you varying rates. So if, for instance, you鈥檙e looking to buy a property in the Buckeye state it鈥檚 important that you ask your broker to compare mortgage rates in Ohio so you can find the best one.
The timing of your application is another huge factor into what kind of interest rates you can get for your mortgage. Your broker should be able to give you insightful advice about properly timing your application for best results.
3. How much should I prepare for down payment?
A good rule of thumb to expect in terms of down payment is to prepare 20% of the total purchase price. But just like interest rates, several factors can come into play to change this number as you file your application. For instance, your broker might be able to negotiate a lower down payment for you. On the other hand, the lender might ask you for a DP higher than 20% because of other considerations.
In any case, your mortgage broker should be able to let you know how much equity you should prepare for the property you鈥檙e eyeing.
4. Can I get any discounts for lump sum payments?
Here鈥檚 a very important piece of information you should know about your lender. Some institutions offer discounts if you are able to make lump sum payments, while others would even impose higher charges for prepayments done before the payments are due.
Your broker should know all the rules imposed by different banks and financial institutions. At the end of the day, it will be your decision which lender to take, but the advice you get from your broker should help you make an informed decision.
5. What are your fees?
Finally, the fees of your broker should be crystal clear to you from the get-go. Your broker is supposed to present you with a document called the Loan Estimate, which contains an annotation of all lender fees and third-party vendor fees you鈥檙e supposed to pay. However, some brokers do not include their own fees in the Loan Estimate, so you might be blindsided about the exact amount you have to prepare for.
Once you have all this information and you鈥檙e good with all the terms and rates you鈥檙e getting, then you鈥檇 know you鈥檙e truly ready to sign that mortgage contract.
