What You Should Be Asking Your Lender Before Committing to a Mortgage Loan

By Fran Campbell - January 23, 2018

When buying a home at the Lake of the Ozarks, there are several factors to take into consideration. One of the things is your mortgage. With all of the lending opportunities available, it's easy to become overwhelmed and just go with the first choice without even asking questions about your mortgage payment responsibilities. That's why the Fran Campbell Team has come up with a list of questions that you should be asking your lender before signing off on a mortgage commitment. Take a look:

1. What is the interest rate?
The first thing you should ask your lender for is a direct interest rate quote, as well as the corresponding annual percentage rate for the loan. The interest rate, along with your mortgage balance and loan term will determine your real monthly payment. A loan with a smaller balance or lower interest rate will make for smaller monthly payments. If you're not sure about the interest rate your lender has quoted you, don't hesitate to shop around with other mortgage lenders to try to get a lower rate.

2. What is the monthly mortgage payment?
Buying a new home means starting a new budgeting plan. As you begin budgeting for your new home, it's important to make sure you can afford the monthly mortgage payment. Be sure to include insurance and taxes into your budget, along with other living and leisure expenses. Your monthly mortgage payment shouldn't be so high that your money can't work toward other financial goals.

3. What is the minimum down payment required?

Different lenders will have different down payment requirements. Most mortgages require a 20 percent down payment. But, for example, if you qualify for a FHA loan your down payment required could be as low as 3.5 percent. Keep in mind that typically loans with lower down payments cost more. Often, when putting down less than 20 percent, you're required to pay for mortgage insurance until your loan value falls below a certain amount. Your down payment has an effect on other loan aspects as well, such as your rate, terms and monthly payments.

4. Are there any prepayment penalties?
Some mortgage lenders will put in the loan agreement that if you pay your loan amount off in full before a certain time frame, you're required to pay a penalty fee to them for early repayment. The reason for this is to ensure the lender that they will be getting paid regardless of how long you hold a loan with them. So it's important before signing off on a mortgage to ask your lender in advance if there are any prepayment penalties. Read through your loan documents carefully so that you understand any repercussions you may face for early payoff.

5. What closing costs will I be responsible for?
Closing costs are expenses over and above the price of a property in a real estate transaction. It's a good idea to get closing cost information upfront so you can begin preparing for this expense. Closing costs may include loan-origination fees, discount points, appraisal fees, title searches and insurance, surveys, etc. Ask your lender to estimate your closing costs so you can budget accordingly.

6. Are there any special requirements I need to be aware of?
There are all kinds of guidelines when it comes to applying for a mortgage. Typically, requirements relate to debt to income ratio, employment status, and your credit report. But in some circumstances you may be eligible for special mortgage programs offered by the government. The best way to find out is by speaking to a lender about all of the options that may be available to you.

When asking these questions, your lender can provide you with the information you need to make an informed decision on choosing a mortgage. You'll able to determine whether the mortgage rates that the lender you're speaking with will allow your monthly payments to be within your budget or match your future financial goal needs. For more real estate related guidance, contact the Fran Campbell Team, the best real estate team at the Lake of the Ozarks to help you through the buying process!

Contact the Fran Campbell Team to get your home CLOSED!