Signing a mortgage means more than paying for the next months, a home loan might be one of the greatest investments of your life, so it is better to read all the lines and ask all the questions before signing the dotted line. Getting as much advice as you need is a must, you do not have to be afraid of asking what you need to take into account to be sure about all the requirements. Professionals from title loans Lubbock provide us with six questions to ask your mortgage broker.
- How are the penalties calculated if I have to break my mortgage early? Repaying your mortgage as soon as possible sounds like a good idea, so you forget about it, the thing is that you can get penalized by your lenders in case of an early payout. You can save yourself thousands of dollars by asking the lender about the way they calculate the “interest rate differential.” It tends to happen that the lender has “posted rates” to calculate the penalties, and it is important because if they do not have these rates, you can end up paying even 5 times higher than a mortgage for your penalty. Prepayment penalties can be calculated based either on a specific percentage of a mortgage loan or the equivalent of a certain number of monthly interest payments.
- Is this a “collateral” mortgage? A collateral loan means you leave something of value as a guarantee you will pay your loan back. You might find some lenders have started putting all of their home loans into a “collateral” charge. By doing this, you give at least 20% equity in the home, this is a significant charge that can be useful but has some disadvantages at the same time because you cannot switch it to another lender at maturity. This leads you to re-register for a new mortgage with a new lender, which will cost you a lot of money, considering legal fees and appraisal costs.
- How long will it take to close my application? Consider this according to the rent you are already paying -if you are-because, you will need to make numbers according to the monthly loan you will be paying and all the expenses you already have. It is better to ask this before signing, so you will be able to organize your economy for the next few months.
- Do I need to get private mortgage insurance? Also known as PMI. This depends on the percentage you put on a conventional mortgage loan, it is convenient when we talk about less than 20%. This is useful in case you are not able to pay, so you protect your lender. However, private mortgage insurance can affect your monthly payment, so it is advisable to check this, remember that this benefits the lender -not you- so you might consider other loan programs.
- What about rate locks? A rate lock is an unchanging interest rate between the offer and closing, it is better to ask if they charge for the rate lock and which is the time frame to close without having any changes on your application.
- Are there any charges or penalties for canceling the mortgage? This is another important question the policies about the mortgage allow you to cancel the loan without penalties. If the answer is yes, then ask how much allowance of time they provide to reconsider the decision. And see if any conditions can influence the application.
A mortgage or home loan can be the loan of your lifetime. It is better to anticipate any hazards and focus on getting all the information needed. Some people can suggest to you what is the best thing to do when asking for a loan, and it is better in this way, because you need to sign the dotted line without any question.