Looking to be Pre-Approved for a Loan, But Where Do You Start?

Are you looking to be pre-approved but are not sure where to start?

The following are some good questions to discuss with your lender when applying for a home loan:

• Are both fixed-rate and adjustable mortgage loans available? (see adjustable rate mortgages below)
• How long can I “lock-in” the financing at the current interest rate and what is the “lock-in” policy?
• Is a float down lock available in case rates drop after I have locked in?
• What are the other fees a lender may charge me in conjunction with my loan?
• Are funds for a second mortgage available?
•  Is there a pre-payment penalty clause? This involves extra charges for paying off the loan before maturity. About 80% of all loans in the United States are paid off early.
•  What is the “grace” period?
•  How late can a monthly payment be made before a late charge is assessed?
•  What will happen if a payment is missed?
•  If you sell your house, will the new buyer (if he/she qualifies) be able to assume your mortgage at the same interest rate?
•  Do you have to pay “points” to get your new mortgage?  A “point” is 1% of the loan.
•  Will the lender require mortgage insurance?
•  Is the loan serviced locally or is the servicing sold? Ask for a written “good faith deposit”.
• What are closing costs and what will the total closing costs be?

On Adjustable Rate Mortgages

• How often will the interest rate be adjusted?
• Is there a maximum limit on each rate change?
• How often will the monthly payment be adjusted?
• Is there a ceiling on payment adjustments?
• Can the term of the loan be extended?
• What is the maximum rate that can be charged over the life of the loan?
• Is there any potential for negative amortization?
• What is the annual percentage rate?

The more knowledgable that you can be about the process the smoother the loan process can be. Visit our earlier post Tips to Smooth Loan Approval for some more great advice from Beth Prochaska- Lending Manager Towne Carolinas. 

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