Questions to Ask Your Lender (cont - 2))
January 18, 2008
The questions today address the specific loan you for which you are applying.
1. What will be the actual principal balance of my loan? This may seem to be a silly questions since your loan application was for a specific amount. However, sometimes lenders roll their fees into the principal. It is important for a borrower to understand the amount of principal in the loan documents as the principal is the amount upon which the interest payments will be calculated.
2. How much will the monthly payments be? Does the amount the lender quotes include taxes and insurance or will I be paying them separately?
3. When will the payments be due? What is the grace period? In general, loans are written so that the monthly payment is due on the first day of each month.
Also, the grace period for most lender will be 15 days after the due date.
4. What is the length of the loan? Is there a balloon payment at the end? (I.E. Is the loan fully amortised?) With all the new loan options, it is important to know exactly what is being covered in your monthly payment. A fully amortised loan will include both principal and interest in every payment. Part of the concern in the financial world of 2007-08 is that many loans were written with a fixed rate for 3 years, 5 years or 7 years and then either come due or switched to an adjustable rate loan.
5. Will I be required to have Private Mortgage Insurance (PMI)? If so, when and how will I be able to remove it?
6. If the loan is paid off early, will there be a prepayment penalty? A prepayment penalty can be up to 6 months of interest if the loan is paid off prior to its due date. Typically, prepayment penalties do not extend beyond the first 5 years of the loan.
7. If I pay for the appraisal, will I receive a copy of the appraisal?
8. If I pay for a credit report, will I receive a copy of my credit report?
When you are interviewing your chosen loan representative, it is important to ask these questions and the questions from the 2 previous days' blogs. However, the questions cited today should also be with you when you meet with the lender or notary to sign your loan documents. No matter what you have been told, the documents will be the written contract between you, the borrower and the lender. If the documents are different than the terms you expected, don't sign them until you are clear about the loan you are receiving.
The questions today address the specific loan you for which you are applying.
1. What will be the actual principal balance of my loan? This may seem to be a silly questions since your loan application was for a specific amount. However, sometimes lenders roll their fees into the principal. It is important for a borrower to understand the amount of principal in the loan documents as the principal is the amount upon which the interest payments will be calculated.
2. How much will the monthly payments be? Does the amount the lender quotes include taxes and insurance or will I be paying them separately?
3. When will the payments be due? What is the grace period? In general, loans are written so that the monthly payment is due on the first day of each month.
Also, the grace period for most lender will be 15 days after the due date.
4. What is the length of the loan? Is there a balloon payment at the end? (I.E. Is the loan fully amortised?) With all the new loan options, it is important to know exactly what is being covered in your monthly payment. A fully amortised loan will include both principal and interest in every payment. Part of the concern in the financial world of 2007-08 is that many loans were written with a fixed rate for 3 years, 5 years or 7 years and then either come due or switched to an adjustable rate loan.
5. Will I be required to have Private Mortgage Insurance (PMI)? If so, when and how will I be able to remove it?
6. If the loan is paid off early, will there be a prepayment penalty? A prepayment penalty can be up to 6 months of interest if the loan is paid off prior to its due date. Typically, prepayment penalties do not extend beyond the first 5 years of the loan.
7. If I pay for the appraisal, will I receive a copy of the appraisal?
8. If I pay for a credit report, will I receive a copy of my credit report?
When you are interviewing your chosen loan representative, it is important to ask these questions and the questions from the 2 previous days' blogs. However, the questions cited today should also be with you when you meet with the lender or notary to sign your loan documents. No matter what you have been told, the documents will be the written contract between you, the borrower and the lender. If the documents are different than the terms you expected, don't sign them until you are clear about the loan you are receiving.
posted by shirley harry at 8:59 AM
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