Before you settle on a mortgage lender, there are a five questions you should ask. If you don't like the answers you receive, continue shopping for a loan until you find a Lender with whom you feel comfortable.
Question 1: Which Type of Loan is Best?
Reputable lenders will find out more about you before throwing out loan options. You wouldn't expect a doctor to suggest surgery before she assessed your medical situation, right? Choose a Lender who gathers enough information from you before he suggests a certain type of loan.
Question 2: What is the Interest Rate and Annual Percentage Rate?
The annual percentage rate (APR) is derived by a complex calculation that includes the interest rate and all the other related Lender fees divided by the loan's term. However, bear in mind that:
- Some Lenders do not compute APR correctly
- There is no way to accurately compute an APR rate for an adjustable loan
- An APR does not account for early payoffs
If your interest rate is adjustable, ask about its:
- Adjustment frequency
- Maximum annual adjustment
- Highest rate (Cap)
Question 3: What are the Discount Points and Origination Fees?
Each "point" is equal to 1 percent of the loan amount. Therefore, 2 points on a $100,000 loan cost $2,000.
- Sometimes Lenders charge origination fees in addition to points
- Points "buy down" the interest rate, meaning the more points you pay, the lower the interest rate
- Points are also tax deductible, even if the seller pays some or all of the points
Question 4: What Are All the Costs?
All the costs of a loan include fees such as:
- Credit report
- Lender's title policy
- Pest inspection reports
- Escrow (where applicable)
- Recording fees
An estimate of these fees constitutes what is now called the Loan Estimate, which the Lender is required by federal law to give to you.
Question 5: What is the Loan Estimate?
Lenders are required to give you a loan estimate, accurately containing all of the costs of your loan, and to deliver the loan estimate when an application has been completed. The following 6 items are typically required to be received first:
- Name of borrower
- Social Security number
- Property address
- Estimated value of property
- Loan amount
There’s a lot to consider, and sometimes the options can feel overwhelming. The DECU Mortgage Team is here to answer questions, help you consider your options, and provide loan programs specifically suited to fit your needs.
They say home is where the heart is. And DECU is where the help is.