Getting a loan for a new home can be a daunting experience. New terminology, changing regulations and comparing different interest rates can cause confusion and uncertainty. However, you can clarify the lending process by keeping these five essential questions in mind when speaking with a prospective lender.
Our 5 questions to ask your lender are:
What Is the Interest Rate?
Consumer finance organizations recommend that homebuyers compare interest rates at a number of lending institutions. Homebuyers should ask about the interest rate for the type of loan they need, answers about paying for point upfront in order to reduce the interest rate, and about the length of the loan term.
What Types of Loans Do You Offer?
Your lender may provide a number of loan options from which to choose, such as:
- Fixed rate loans – The interest rate on fixed-rate mortgages remains the same over the life of the loans. These loans make it easier to arrange your budget because the payment remains the same over the term of the loan.
- Adjustable rate loans – These loans may offer an attractive, low rate of interest in the first few years, which increases over the life of the loan. Adjustable rate loans may be the best option if you intend to stay in the home for only a few years.
- Jumbo loans – Jumbo loans were designed to provide financing for expensive properties that exceed ordinary loan limits. Additional scrutiny is given to income to qualify for these loans.
- VA home loans – These loans are guaranteed through the U.S. Veteran’s Administration and offer an attractive interest rate for veterans of the military and active duty service people.
How Much Will I Pay in Closing Costs?
The lender is required by law to provide a Good Faith Estimate of all cost within three days of providing loan approval. Homebuyers should look over the estimate carefully to see if these costs are in line with industry standards for a loan.
Can I Pay Off the Mortgage Without Penalty?
Some loans do not have a prepayment cost if you pay off the loan before the end of its term. Others will offer a lower interest rate if you accept the prepayment requirement. The amount may be one percent or an amount equal to six months’ interest. Prepayment may apply when you refinance the loan or pay down more than the 20 percent of the loan.
How Long Will It Take To Process My Loan?
Generally, a loan will take a few weeks to two months to complete. The length of time depends upon the workload the lender is experiencing and how aggressively they are marketing their loans.
If you’re looking to buy or sell your home, DeSelms Real Estate is here to help. Whether it’s putting you in touch with our expert lender or one of our award-winning realtors, we are happy to assist you. Give us a call at DeSelms Real Estate 615.550.5565 or drop us a line today!