Questions to ask your mortgage broker - When you apply for a mortgage loan there are many important questions you will want to ask your mortgage broker. The questions you ask will give you a clearer picture of the mortgage you will be receiving and if it is the mortgage you want. These questions are but are not limited to the following.
Will I be charged points
Some lenders will charge points and others will not. Points are reflected as origination fees on your good faith estimate. Some brokers charge points as a fee for their service others charge them to provide you with a lower rate.
How long is my mortgage fixed? How often can it adjust? How much can it adjust for any one adjustment? What is the lifetime limit on the rate? What would my payment be if the rate were to go that high?
You need to know these answers for Adjustable Rate Mortgages. You need information about how your payment would rise in a worst case scenario so you can make an intelligent, informed decision. A good experienced loan officer can quickly calculate these numbers for you.
Does my loan have a pre-payment penalty?
Some loans come with a pre-payment penalty and should be disclosed when being presented to you as an option. A loan which has a pre-payment penalty feature may reduce your interest rate or cost, but it may also cause you problems if you decide to sell your home or refinance before this pre-payment period is up. A pre-payment penalty can be as much as 6 months of interest payments.
Will you sell my information to other loan officers?
This question is especially important if you are applying for a mortgage online. Many mortgage websites on the internet are "leads" companies that gather and sell applicants' information to other mortgage companies for a profit. These "leads generating" websites often advertise to have multiple lenders competing for your business. The truth is they would sell your information to various companies. To avoid having your information being sold and resold, and being harassed by endless phone calls for years to come, work only with mortgage brokers and lenders who do not sell your information.
Something to ask your mortgage broker is:
What will my total closing costs be?
Your broker, or any mortgage loan officer, is required to provide you with an estimate of your closing costs within 3 days of loan application. This is a great time to review what this home-loan transaction is going to cost you and ask questions about any fees or charges that you are unsure of.
May I see the Amortization Schedule? You may want to ask your mortgage broker for the amortization schedule. This gives a clear and concise 'Landscape View' of the amortization. For most non professionals, it is easier to spot term and rate adjustment properties of the loan this way.
Does my mortgage have a Pre-Payment Penalty
A Pre-Payment Penalty is a fee that is charged to by the lender if you refinance or sell your home within a given period of time. Pre-payment penalties are very common with sub-prime loans. Even with a mortgage from a more traditional bank you may have or want a pre-payment penalty. There are very few circumstances where a pre-payment penalty will interfere with your future plans. Accepting a pre-payment penalty may also lower your points and/or rate on the loan.
How long is my preapproval good for?
The length of a preapproval letter can vary, in general they are good for 30 days. If your preapproval letter expires, you will need to become prequalified again by your mortgage professional.
How Long is my rate fixed for
It is better to ask how long your rate is fixed for because it forces an honest answer. More unethical brokers may respond to the question, "Is my rate fixed or adjustable" with something misleading like, "You have a 5 year fixed 30 year mortgage." While many people might misinterpret this to mean that it is fixed for 30 years and not hear or understand the 5 year comment, the truth is you are getting a 5 year ARM. If you ask, "How long is my rate fixed for" the same broker might be more compelled to answer with "5 years" indicating that the loan is adjustable.
Questions to Ask Your Mortgage Broker - If you are considering applying for a mortgage, it is important to ask questions and have your questions answered. You need to feel comfortable that the decision you are making is the right one. Here are some questions you might want to ask.
Do you have any client references? One of the best ways to find out if your broker is going to be right for you is by speaking to previous clients. Were they kept informed throughout the process? Were they happy with the service? Did the broker put them in the right loan program? Were the fees reasonable? Any reputable mortgage broker would be more than happy to give you references. It means a) You're a smart borrower who wants to know all the options and you don't rush into things. and b) You're seriously considering using this broker and just want to make absolutely sure.
What loan program based on my situation will be right for me? Your mortgage broker should be able to help you decide on a mortgage. There are numerous loan programs to choose from such as Adjustable Rate Mortgages (ARM), Fixed Rate Mortgages, and Pay Option Arms. They will also be able to help you determine what the length of your loan term should be; 15 year, 30 year , 40 year, or even 50 year.
Don't be afraid to ask your mortgage broker exactly how much he is earning from your loan. Ask if you are being charged any Yield Spread Premium and what effect it has on your interest rate. Mortgage brokers are required to disclose their fees in writing in the form of a Good Faith Estimate. Honest brokers should have no problem letting you know up front the amount of their fees for your loan. Also keep in mind that the lowest fees do not mean the best service. If you shop based on fees and interest rate alone you may end up working with the biggest liar, not the best mortgage broker.
If your mortgage broker is recommending an Adjustable Rate Mortgage, an important question to ask is "What are the caps on this loan?" You will want to know the caps, or maximum adjustment, for the initial adjustment, for each adjustment period after that and for the life of the loan.
What are interest rates based on? If the broker answers either treasury bonds or the Prime, RUN do not walk away. Interest rates are based on mortgage backed security's. If your broker is watching the wrong rate then you could get a bad deal. The Prime rate has some influence on mortgage rates but does not accurately reflect what rates are doing.
Is there a prepayment penalty?
A prepayment penalty means that if you pay off your loan within a certain amount of time (by selling or refinancing) you will have to pay a penalty. Usually this penalty is several thousand dollars. Prepayment penalties are not always bad. In fact, you can usually get a lower interest rate if you have a prepayment penalty. But if you think you will be selling or refinancing your home within the next few years, it may be in your best interest to avoid having a prepayment penalty. In any case, you should at least know if you have one.
Do you have access to live, real time, mortgage bond quotes? (If a broker/lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday’s newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who is only able to grab yesterday’s paper to tell you how a stock traded yesterday, but had no idea what the movement looks like at the present time and what market conditions could cause changes in the near future? No way!)
Be smart... Ask questions… Get answers!
More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life… but we do this every single day. It’s your home and your future. It’s our profession and our passion. We're ready to work for your best interest.
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