The Top 5 Questions to Ask Your Lender.
The Top 5 Questions to Ask Your Lender
The Top 5 Questions to Ask Your Lender1. “Which loan is best for me?”
When applying for a mortgage, it’s important to know about the various different types of loans available, and which one is best suited for you. For example, there are fixed rate and adjustable rate mortgages, loans than run 30 years or 15 years, and government assistance programs if the home you are purchasing is in need of repair or is located in a rural area. An honest lender will work with you and help you identify the best type of loan for you, so don’t be afraid to ask if there are other options available.
2. “What does APR really mean?”
Many buyers are confused by interest rates, annual percentages rates (or, “APR” for short), and how to tell the two apart. APR is a figure that is calculated by a complex formula. It includes the interest rate and all of the other related lender fees divided by the loan’s term. Because interest rates fluctuate, so does the APR. When your lender is calculating the numbers, ask them to explain all fees, including the APR, so that you’ll have a better understanding how they reached the total of the loan and your monthly mortgage payment amount.
3. “What are discount points?”
If there’s one thing that confuses first time buyers, it’s discount points! Discount points allow you to buy down the interest rate, and generally speaking, a point is equal to one percent of the loan amount. So, if your loan is for $200,000 and you buy two points, that’s $4,000 off your loan. Basically, you’re making an upfront payment that reduces the interest rate and saves you money over the life of the loan. Oh, and they’re also tax deductible! Some lenders offer discount points, but others don’t, so be sure to ask if yours does. Also, be aware that many lenders charge fees for points, so clear that up beforehand, too.
4. “Do you offer loan rate locks?”
Interest rates can swing up or down fairly quickly, meaning the rate that a lender quotes you during your pre-approval may not be the same one you receive on your final loan agreement. The best way to make sure that you get the rate you were first quoted is by locking in the rate. Most lenders offer this option, but some don’t, so it’s always a good idea to ask. Typically speaking, you can lock in a rate for less than one point, so that’s some added security and one less headache you’ll have to deal with later in the process.
5. “Is there a prepayment penalty?”
This is a very important question that many borrowers forget to ask because they aren’t thinking about the future when they’re purchasing a home in the here-and-now! In many states, prepayment penalties are illegal, but some states still allow lenders to charge up to six months of unearned interest if you pay off the loan early though a refinance or if you sell the home. You never know what the future holds, so it’s always best to know if you’ll be charged a penalty should you refinance or sell your home at some point down the road.
When applying for a mortgage, it’s important to know about the various different types of loans available, and which one is best suited for you. For example, there are fixed rate and adjustable rate mortgages, loans than run 30 years or 15 years, and government assistance programs if the home you are purchasing is in need of repair or is located in a rural area. An honest lender will work with you and help you identify the best type of loan for you, so don’t be afraid to ask if there are other options available.
2. “What does APR really mean?”
Many buyers are confused by interest rates, annual percentages rates (or, “APR” for short), and how to tell the two apart. APR is a figure that is calculated by a complex formula. It includes the interest rate and all of the other related lender fees divided by the loan’s term. Because interest rates fluctuate, so does the APR. When your lender is calculating the numbers, ask them to explain all fees, including the APR, so that you’ll have a better understanding how they reached the total of the loan and your monthly mortgage payment amount.
3. “What are discount points?”
If there’s one thing that confuses first time buyers, it’s discount points! Discount points allow you to buy down the interest rate, and generally speaking, a point is equal to one percent of the loan amount. So, if your loan is for $200,000 and you buy two points, that’s $4,000 off your loan. Basically, you’re making an upfront payment that reduces the interest rate and saves you money over the life of the loan. Oh, and they’re also tax deductible! Some lenders offer discount points, but others don’t, so be sure to ask if yours does. Also, be aware that many lenders charge fees for points, so clear that up beforehand, too.
4. “Do you offer loan rate locks?”
Interest rates can swing up or down fairly quickly, meaning the rate that a lender quotes you during your pre-approval may not be the same one you receive on your final loan agreement. The best way to make sure that you get the rate you were first quoted is by locking in the rate. Most lenders offer this option, but some don’t, so it’s always a good idea to ask. Typically speaking, you can lock in a rate for less than one point, so that’s some added security and one less headache you’ll have to deal with later in the process.
5. “Is there a prepayment penalty?”
This is a very important question that many borrowers forget to ask because they aren’t thinking about the future when they’re purchasing a home in the here-and-now! In many states, prepayment penalties are illegal, but some states still allow lenders to charge up to six months of unearned interest if you pay off the loan early though a refinance or if you sell the home. You never know what the future holds, so it’s always best to know if you’ll be charged a penalty should you refinance or sell your home at some point down the road.
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Kentucky First-Time Homebuyer Loan Programs for FHA, VA, KHC and USDA Mortgage Loans in Kentucky 
For the most part this is fairly simple. Do you have enough assets to put the money forth to qualify for the downpayment that the particular program asks for. USDA says that there can be no money down. FHA, for now, has a 3.5% downpayment. Some loans require 20% down. These assets need to be validated through bank accounts and sometimes gifts. Can you borrower the down payment? Sometimes. Generally if you’re borrowing a secured loan against a secured asset you can use that. But rarely can cash be used as an asset. TALK TO YOUR LOAN OFFICER FIRST when discussing what’s acceptable?
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—
Joel Lobb (NMLS#57916)
Senior Loan Officer
502-905-3708 cell
502-813-2795 fax
kentuckyloan@gmail.com
Key Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*
Louisville, KY 40222*
http://mylouisvillekentuckymortgage.com
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