More Q&A's for Mortgage Lenders
As you are shopping for a lender to provide a mortgage for your new acquisition, it is important to ask questions. The answers to your questions will give you a clearer perspective on the lender or broker you are choosing to provide a mortgage. We continue below with more questions and answers that will help you in your choosing process.
What Is This Loan Going To Cost, Really?
One of the more intricate questions you should ask concerns the costs of the loan you need. Loan costs not only include costs the lender will pocket, but there are third-party costs in terms of vendors fees that need to be considered as well. Such costs as appraisal fees, credit report costs, home and pest inspection charges, escrow, Lender's title policy, recording fees, and of course, taxes are all part of the costs of a loan. The lender is required by law to present the Good Faith Estimate (GFE) to you and this form includes all estimated fees. It's important to remember that all loans cost money and if the costs are not paid up front, then they will most certainly be rolled into your loan, thus increasing the loan balance. The idea of a no-cost mortgage is fairy dust. There's no such thing, unless you are borrowing from a generous source (like Mom and Dad). Get a clear explanation for each of the fees. Some are just ways for the lender to take your money. Sometimes you can negotiate fees, or even have them waived. Hold the thought that the lender is after your business, so fee negotiation can be part of the leverage you have in reducing mortgage costs.
The Good Faith Estimate
While we're on the subject of the GFE, according to the Real Estate Settlement and Procedures Act (RESPA), lenders have a three day period after the loan application to present you with a GFE, which should contain all the costs of the loan. However, the Good Faith Estimate need not be guaranteed by the lender. Still, many people use the GFE as a point of pressure and lenders do yield and guarantee the GFE. Sometimes the lenders say that they can't guarantee the GFE because costs change when it comes to third-party services-which has a measure of truth to it. This is where you can ask them to guarantee everything but the third-party fees. Also, it is possible for the lender to know who the third-party vendors are and the GFE can, in fact, be guaranteed fully. If your lender is unwilling to stand behind the Good Faith Estimate, find another lender.
Can You Lock-In The Interest Rate And Points?
Find out if your lender is willing to lock-in the interest rate. Interest rates fluctuate and often change from day to day. If you know your rates are about to go up, ask the lender to lock your loan in at the lower rate. The charge, if there is one, is zero to one point. You will want to ask the lender if there is a fee to locking in your mortgage interest rate and if the lock-in will protect all of the costs on the loan. Find out how long the locked-in rate will be valid and ask for the lock-in in writing. Although you are not required to use the lender if the rates fall, most lenders will work with you in order to keep the business. If the lock-in is for 30 days, most lenders won't bother charging for a loan-lock. Even if you haven't found a property to buy, you can still have a loan locked-in at a specific interest rate; however, most lenders do want an address before they'll lock in the rate. The alternative to not having your loan locked in is to pay whatever the rate and points are on the day of the loan funding.
