Asking questions and doing your research is crucial when looking for a mortgage lender. This is important because firstly, not all lenders are the same, and secondly, you need to understand as much as possible before moving forward in the home loan process.
Whether you’re purchasing a home or refinancing, ask these questions to your lender.
What Types of Home Loans Do You Offer?
You should start by asking your lender what kind of loans they offer. Most lenders offer fixed-rate mortgages and adjustable-rate mortgages (ARMs). You should find out about the lengths of the fixed-rate periods if you are keen on getting an ARM. This is very important to know since you could save some money before the interest rate adjusts if you know you’ll be moving out within a few years.
Which Type of Mortgage Is Best for Me?
As you talk to a lender, be sure to give plenty of details regarding your current situation and answer any questions they have. If they do recommend a specific loan option for you, have them put that option in writing so you can later understand the differences and be educated about the strengths and weaknesses of each scenario. This will also be a good time to ask about alternatives. Don’t be afraid to ask questions especially if a fee or cost looks odd to you; always make them explain it.
What Will My Interest and APR Be?
Most of the time, when lenders advertise interest rates, there are two rates that you’ll see. The first rate is the base interest rate that you’ll be charged for the mortgage.
The second rate is the annual percentage rate (APR). The APR is higher because it factors in the base interest rate along with the closing costs associated with the loan.
One important thing to keep in mind is, the bigger the difference between the base interest rate and the APR, the higher the lenders will charge in fees. Your lender must also be able to explain the factors that go into deciding your interest rate.