What to Ask About a Mortgage

Obtaining a mortgage can be extremely overwhelming if you don't know how to compare offers and don't know what the loan terms are. This article will help you decide what to ask about a mortgage when you're comparing offers and give you an easy way to understand and compare. This will allow you to decide on the best loan available to you.

There are a variety of mortgages available today and it's important to first understand what type of mortgages the lender offers. The most popular mortgage is the fixed-rate mortgage. You can get a 10, 15, 20, 30, 40, and even 50-year fixed-rate mortgage. FHA loans, insured through the government, are also very popular. Down payments required for FHA loans are low and the FICO requirements are also much lower than required for traditional mortgages. Interest-only loans are yet another option, allowing you the option of interest-only payments and usually requiring a balloon payment at the end of the loan period.

The interest rate is one of the most important questions to ask about a mortgage. The interest rate is what mostly determines what you'll pay over the period of the loan. In general, the higher your credit, the lower the interest rates you'll be offered. Ask for the annual percentage rate (APR) of the mortgage interest, which includes all lender's fees. This will give you the best way to compare loan offers and should be used with an itemized list of rates and fees.

The down payment required is usually between 5 and 20%. Generally, the terms and interest rate of your loan will be based on your down payment, meaning that you can often get better terms if you put more money down. If your down payment is low you may be required to pay for private mortgage insurance (PMI).

The guidelines for your mortgage are things like income, credit history, any liabilities, and assets. Often times, first time homebuyers programs and other government-sponsored programs have easier qualifying guidelines to fulfill so this is important to ask about a mortgage.

Know ahead of time what documents you'll need to provide for the application process. You'll usually need to provide proof of income and any assets. If you have very good credit you may be able to get a no-documentation loan but expect to pay a higher interest rate and need a large down payment.

Asking if any terms are negotiable is very important to ask about a mortgage. Knowing if any terms or closing costs can be negotiated can potentially save you thousands of dollars.

Sometimes, lenders will charge pre-paid interest points to offer you a lower interest rate. Othertimes, points offered may have no benefit whatsoever. Getting the details of origination and discount points will give you a good way to compare offers.