Asking the Right Questions before Signing a Loan

Articles on Loans | Topics: loans, loan, loaning

by Orsola Newton

If there's one rule that dominates in the home mortgage industry it is this: That you never go solely according to the mortgage interest rate. Instead, it makes good sense to take a close look at the jargon surrounding a mortgage program. You could even check back with lenders or a mortgage broker or shop on the Web for comparative rates. While you shop around, be armed to ask your mortgage lender a few key questions given here. The answers that you get will help you decide which loan is best for you.

How soon can I expect my mortgage loan application to take?

Typically, a loan application for a home mortgage takes about 45-60 days to come through. Of course, there have been times when they've taken just 30 days too! But really the time taken depends on how soon the lender can get the property appraised, a credit report and employment details and bank accounts verified.

Which documents will I have to furnish?

A certificate proving your income and assets will be necessary to get a home mortgage loan. However, lenders ask for different documents, so it depends on whom you meet.

What would qualify me for a home mortgage loan?

Your lender will look at your credit history, income, employment status, assets and debts before granting you a home mortgage loan. If you're a first time home buyer, you stand a better chance of being granted a loan.

How much would I have to pay as a minimum down payment?

First, finalize the down payment amount on your home mortgage loan. Based on this your lender can offer you a range of interest rates, loan terms and perhaps even refuse to consider private mortgage insurance. While some loans demand a 20 percent down payment; others are lower than that.

How much mortgage interest would I have to pay annually?

To compare well against different lenders' rates on your home mortgage loan, ask them for their annual percentage rate or APR of the mortgage interest.

How much would I have to pay by way of origination fees on the loan?

Origination fees are usually paid as prepaid mortgage interest on your entire home mortgage loan. Your lender might ask you to pay this in points at closing time just so that you get a lower interest rate on your home mortgage loan.

Bit of History

The contented and economically comfortable have a very discriminating view of government. Nobody is ever indignant about bailing out failed banks and failed savings and loans associations.... But when taxes must be paid for the lower middle class and poor, the government assumes an aspect of wickedness.

—John Kenneth Galbraith (b. 1908)

Can the interest rate also be locked in?

The interest rate of your home mortgage loan is variable, so it could rise or fall before you closing time. So, it would be wiser to lock in the rates for a specified time period rather than have a floating rate till closing. Ask your lender for any fee for locking in a rate and if you could lock in points.

What is meant by the 'good faith estimate' of closing costs?

Mortgages, including home mortgage loans, are accompanied by a whole litany of fees. So, ask your lender to show you the whole list of estimated closing costs before you actually apply for the loan. And bear in mind that certain fees must be paid upfront, for instance the credit report, property appraisal and loan application fee.

Will I also be asked to pay a prepayment penalty on the loan?

This is a matter for mortgage home loan shoppers to consider. You would need to know the duration of the penalty period and how the fee will be calculated. While some penalties stand at one percent of the loan amount, others aren't that simply calculated.

Can I expect any setbacks in my home mortgage loan being approved?

Everything on your home mortgage loan can go like clockwork if you provide the lender with complete and accurate information about your financial status. However, there could be a delay if the lender finds credit problems in your financial statement. To avoid such an eventuality, notify your lender on your personal or financial status if there is a sudden change after you have sent in your application. For instance, if you have changed jobs suddenly, got an increase or decrease in your salary, have had a windfall, or if you have a change in your marital status, inform your lender.

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Please note: All personal opinions expressed in the "Asking the Right Questions before Signing a Loan" article belong to the contributing author and are not necessarily shared by LoansCreditConsolidation.com.

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