The murky waters of mortgage lending can be difficult to navigate if you are lacking the critical information needed to successfully formulate a mortgage loan plan. There is a wide variety of areas that need to be discussed and explained to ensure that you are getting the best loan possible. It is important to ask questions that will increase your knowledge of what you’re getting into. We have compiled a list of the 10 best questions you should ask Baltimore mortgage lenders in order to develop a proper understanding of your loan terms.
1. What Can I Afford?
A common mistake that first time home buyers often make is taking out a mortgage that they cannot afford. Financial situations can quickly change and successfully paying off a mortgage requires a stable income. Be sure to meet with your lender before your real estate agent to discuss how much you can afford to pay for a house. Generally, 25% of your net income should be allocated towards paying for your mortgage. Another way you can find out what you can afford is by getting pre-qualified for a mortgage. This allows you to see exactly how much you will be able to borrow.
2. How Much Will My Down Payment Be?
After gaining a sense of what you can afford, the next step is to ask your mortgage lender how much down payment you will need. The industry standard is 20%, however, it is not always required. Alternative options include FHA loans VA loans. FHA loans are mortgage insurance backed mortgage loans. VA loans apply to veterans and are offered by the United States Office of Veterans Affairs. Amount of down payment is crucial to discuss with your lender. Situations vary and different percentages of down payments will benefit buyers in ways unique to the individual.
3. Which Type of Mortgage Best Suits My Situation?
With a variety of different types of mortgages available, you should ask Baltimore mortgage lenders to discuss all of the potential options available to their buyers. With the available array of mortgages, a professional lender will be able to pair buyers with the best possible fit to their budget and financial situation.
4. What is My Interest Rate and My APR?
Likely the most important aspect of mortgage lending is the interest rate and annual percentage rate. Your interest rate can either be adjustable or fixed. With an adjustable rate, make sure you know how much it will be adjusted and how often. Find out the lowest interest rate percentage that you qualify for and be sure to ask about any additional fees. The APR will contain these fees and potential discount points which should definitely be discussed. Gaining an understanding of what your rate entails is key to mapping out a successful mortgage loan.
5. What Can I Do to Make My Rate Lower?
Any reputable lender should be willing to discuss steps you can take to lower your rate. Your rate is initially determined by credit score, amount of down payment and type of mortgage; however, it can be positively or negatively impacted by a slew of factors prior to taking out the mortgage. Be sure to take the necessary steps to lower your interest rates and discuss with your lender what these options could entail.
6. What Will My Monthly Payment Be?
A solid understanding of what your monthly expenses towards the mortgage will allow for buyers to know what to expect and map out their monthly finances. Ask your mortgage lender about any potential penalties and how much your monthly rate is subject to change. Monthly payments are the backbone of a mortgage and should be regarded as highly important. If your lender cannot provide exact increases in monthly payment, ask for an estimate and to list potential causes for a rise in payment.
7. How Long Will It Take Until My Loan Closes?
In preparation for a mortgage loan, the inevitable end of the mortgage must be considered and a target time frame should be established. By formalizing a desired timeline, buyers and lenders can properly formulate a plan with an idea of a predetermined loan close date. This will make the end of the loan a foreseeable goal and give buyers a period of time where they should be hyper vigilant on doing things that will negatively affect their credit.
8. Can You Provide an Estimate of What My Closing Costs Would Be?
Before you take out a mortgage be sure to have your lender make you aware of closing costs and other third party fees associated with your loan. This will be due at signing and the sooner you are made aware of them, the better prepared you will be. Professional Baltimore mortgage lenders will be able to provide accurate estimates and compile known closing costs.
9. Do I Have to Pay for Mortgage Insurance?
Mortgage insurance is typically determined by the down payment amount and will generally be required for down payments less than 20%. If you are required to pay mortgage insurance, ask exactly how much this will end up costing you and how much more of a down payment you need to avoid paying it.
10. Will I Have to Pay for An Interest Rate Lock?
An interest rate lock is an important tool available to buyers when dictating the fluctuation of interest throughout the mortgage term. While an interest rate lock prevents the rate from increasing it also nullifies the chance of it decreasing. Ask your lender if an interest rate lock would benefit you and if they will charge you for implementing one.
When choosing a mortgage lender it is essential to choose one that will discuss every aspect of your mortgage loan with you and explore all possibilities. It is equally important as a buyer to ask for insight on all of the areas that you are lacking information in. Buying a house is a massive undertaking and should be treated with due diligence. Informing yourself by asking Baltimore mortgage lenders these questions will allow you to make educated decisions regarding your mortgage and asking the right questions assists in broadening your understanding of your loan terms.
At Federal Hill Mortgage, we are committed to a transparent and informative relationship with all of our clients. Our expert team of mortgage professionals will make every effort to facilitate an overall understanding of your mortgage. Contact us today to find out the difference that Federal Hill Mortgage can make on your home buying experience.