Taking out a mortgage loan is an intricate process. You must strive for obtaining a better rate. While you are in the loan buying process, a lot of questions related to mortgage rate appear in your mind. If you have zeroed in on a particular lender, you need to ensure that you have the satisfactory answers to all these questions. Lender should have clear answers to all your queries. Here we discuss about some pertinent queries that may appear in your mind -
1. What is the rate of interest on the loan?
When you are taking out a mortgage loan, you have all the rights to know the rate of interest on the loan. Rate of interest is the amount of money, expressed as a percentage term, charged by the lender for the use of funds. In case of adjustable rate mortgages, rates very, whereas in case of fixed rate mortgages, rates remain fixed throughout the term of the loan. Anyways, you should be well aware of the mortgage rate. Again, in order to get a better idea about the true borrowing cost, you should be aware of the annual percentage rate (APR). APR includes mortgage rate of interest as well as some other costs.
2. Are there any other costs involved in the loan?
In addition to the rate of interest, there are several other costs involved in a mortgage loan. These include discount points, loan origination fees, underwriting fees, mortgage processing fees, title fees. Some of these fees are charged at the time of closing whereas some other fees may be rolled over the loan. Whatever be the case, you should be aware of all the fees associated in the mortgage buying process. In fact, as per the Good Faith Estimate (GFE), lenders are obliged to reveal these costs before offering the loan.
3. Is there any discount point applicable in the loan?
In some cases, lender may charge discount points so as to lower down the mortgage rate. Discount points are nothing but prepaid mortgage interest rate. You need to check it out before applying for a mortgage loan.
4. Is there any prepayment penalty associated with the mortgage?
Some lenders charge prepayment penalty for early repayment of the loan. The extent of prepayment penalties also vary. For some lender prepayment penalty amount may be equivalent to interest amount of 6 months. Again, some lenders may charge a prepayment penalty to the tune of 1% of the loan amount.
5. What is the minimum amount that you need to pay down?
In most of the cases, if you take out a mortgage loan, you have to pay a certain percentage of the loan amount as down payment. This down payment amount may vary from 3% to 20%. You should be well aware of the minimum down payment amount that you need to pay to take out the loan. Here, it is to be noted that higher the down payment amount, better is the rate and vice versa.
These are some pertinent questions that may appear in your mind before taking out a mortgage loan. You should have satisfactory answers to all these questions.