Ask for a list of current mortgage interest rates and whether the rates being quoted are the lowest for that day or week. Ask whether the rate is fixed or adjustable. Keep in mind that when interest rates for adjustable-rate loans go up, generally so does the monthly payment. If the rate quoted is for an adjustable-rate loan, ask how your rate and loan payment will vary, including whether your loan payment will be reduced when rates go down. Ask about the loan’s annual percentage rate (APR). The APR takes into account not only the interest rate but also points, fees, and certain other credit charges that you may be required to pay, expressed as a yearly rate.
Points are fees paid to the lender for the loan and are often linked to the interest rate; usually the more points you pay, the lower the rate. Ask for points to be quoted to you as a dollar amount–rather than just as the number of points–so that you will actually know how much you will have to pay.
DOWN PAYMENTS and PRIVATE MORTGAGE INSURANCE
Some lenders require 20 percent of the home’s purchase price as a down payment. However, many lenders now offer loans that require less than 20 percent down–sometimes as little as 5 percent on conventional loans. If a 20 percent down payment is not made, lenders usually require the home buyer to purchase private mortgage insurance (PMI) to protect the lender in case the home buyer fails to pay. When government-assisted programs such as FHA (Federal Housing Administration), VA (Veterans Administration), or Rural Development Services are available, the down payment requirements may be substantially smaller. Ask about the lender’s requirements for a down payment, including what you need to do to verify that funds for your down payment are available.
If PMI is required for your loan,
- Ask what the total cost of the insurance will be.
- Ask how much your monthly payment will be when including the PMI premium.
- Ask how long you will be required to carry PMI.
Visit http://www.fdic.gov/consumers/looking/ to print off valuable worksheets that will help you track your information in order to find the best home for you and your family.
If you have any questions please feel free to contact us.