Top Questions for your Mortgage Broker or Lender
Are you shopping for a mortgage refinance? Or is "buying home" at the top of your to-do list? In either case, you'll want to ask a mortgage broker or lender some important questions during a mortgage interview. Here is a list of several key questions to get the ball rolling.
If you're in the market for a mortgage refinance, or looking for a first-time home purchase, you're probably wondering what part of the mortgage process is most important. The answer is simple: The mortgage interview. Do your homework upfront and ask the right questions, and your mortgage broker or lender will be the ideal partner.
Best type of loan
Ask a mortgage broker to explain the pros and cons of a variety of different loans, including those that are fixed rate, adjustable rate, and interest-only. It generally makes the most financial sense to choose a fixed-rate loan, unless you're planning to sell the property within five years. Even then, an adjustable-rate loan can be a bit of a gamble. Avoid interest-only loans, except in rare cases, such as if you expect a huge salary boost and plan to refinance. These types of loans make it difficult to build equity, which is a huge drawback.
In each case, be sure that your broker goes through all your options, and beware the person who is overly-eager to sell you a specific product. They may be receiving a hefty kick-back from the lender, and could be selling you a loan that's not in your best interest.
Higher origination fee versus lower rate
Closing costs are typically in similar ranges for most lenders, but the game gets tricky when a mortgage broker starts adding in origination fees. Many times, a broker can get you a lower rate, but they'll subsequently charge you a higher fee. It's tough to make an apples-to-apples comparison. The best way to figure out the numbers is to visit a banker as well as a broker, and ask each to determine your long-term costs under each equation.
Closing costs: Buying home vs. refinance
Mortgage refinance loans usually feature lower closing costs than new home purchases. Sit down with your broker and make a list of all the fees that you'll have to pay at the closing table. Pay attention to costs for the appraisal, credit report, lender's title policy, escrow, recording fees, and taxes. Compare these numbers with other lenders. If you can get a complete quote from someone else, you can use it as a bargaining tool.
These are great introductory questions to ask as you begin the mortgage interview. You'll also want to ask about interest rates, annual percentage rates, loan rate locks, and prepayment penalties. You don't have to be an expert on each of these subjects, but you should become familiar with the concepts. Understanding them can make the entire process easier, and far more cost-effective.