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Mortgage Maze – Are you confused?

There was a time when getting the best mortgage meant comparing the interest rates offered by a handful of mortgage lenders. Today, however, the search for mortgages is more detailed and perhaps just a little too complicated to manoeuvre easily. Adding to the confusion are the many, many types of loans, loan programs of mortgage brokers, lenders, bankers, credit unions, finance companies, among others.

Considering there’s just so much to learn, finding the perfect mortgage that suits your needs is difficult. No, it doesn’t start with an application, but with a thorough knowledge of the system. True, it takes time to understand, but isn’t it better to know the subject before getting into it?

Here are a few key questions you can ask that will help you decide the kind of mortgage that suits you best.

1. How soon can I expect my mortgage loan application to take?

Typically, a loan application for a home mortgage takes about 45-60 days to come through. Of course, there have been times when they’ve taken just 30 days too! But really the time taken depends on how soon the lender can get the property appraised, and your credit report, employment details and bank accounts verified.

2. Which documents will I have to furnish?

A certificate proving your income and assets will be necessary to get a home mortgage loan. However, some lenders ask for different documents, so it all depends on which lender you talk to.

3. What would qualify me for a home mortgage loan?

The lender will look at your credit history, income, employment status, assets and debts before granting you a home mortgage loan. If you’re a first time home buyer, you stand a better chance of being granted a loan.

4. How much would I have to pay as a minimum down payment?

Firstly, decide on the down payment amount of your home mortgage loan. Based on this, your lender can offer you a range of interest rates, loan terms and perhaps even waive certain fees. While some loans demand a 20 percent down payment, others are lower than that.

5. How much mortgage interest would I have to pay annually?

To compare well against different lenders’ rates on your home mortgage loan, ask them for their annual percentage rate or APR of the mortgage interest.

6. How much would I have to pay by way of origination fees on the loan?

Origination fees are usually paid as prepaid mortgage interest on your entire home mortgage loan. Your lender might ask you to pay this in points at closing time so that you get a lower interest rate on your home mortgage loan.

7. Can the interest rate also be locked in?

The interest rate of your home mortgage loan is variable, so it would be wise for you to lock in the rates for a specified period rather than have a floating rate till closing. Ask your lender whether there are any fees for locking in a rate and whether you could lock in points.

8. What is meant by the “good faith estimate” of closing costs?

Mortgages, including home mortgage loans, are accompanied by a whole litany of fees. So, ask your lender to show you the whole list of estimated closing costs before you actually apply for the loan. And bear in mind that certain fees must be paid upfront, for instance the credit report, property appraisal and loan application fee.

9. Will I also be asked to pay a prepayment penalty on the loan?

This is a matter for mortgage home loan shoppers to consider. You would need to know the duration of the penalty period and how the fee will be calculated. While some penalties stand at one percent of the loan amount, others aren’t that simple to calculate.

So now you know the number one rule that dominates in the home mortgage industry … you never go solely for the mortgage interest rate! Instead, it makes good sense to take a closer look at the jargon surrounding a mortgage program. You should do your research and get as much information as possible from your local mortgage lender or mortgage broker, websites, newspapers, mortgage books and consumer seminars.

Published by YourMortgageDirectory Editor
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