Thinking about getting a home loan? For most of us, buying a house is the biggest purchase we'll ever make. But don't worry if you find mortgages confusing - you're not alone! Here's a simple guide to the important questions you should ask any lender before getting a home loan.
1. Mortgage Processing Fees Guide: Understanding Hidden Loan Costs
When you get a home loan, lenders charge something called "processing fees." Here's what you need to know:
- These fees usually cost between $1,000 and $2,000
- They're separate from other costs like home inspection or appraisal fees
- If you have a good relationship with the lender, they might lower these fees
- Always ask about these fees when comparing different lenders
2. Home Loan Interest Rates Explained: Understanding Mortgage Points
Interest rates can be tricky to understand. Here's what to ask:
- Get the basic interest rate with no extras added
- Ask about "discount points" (extra money you pay upfront to lower your rate)
- Make sure you compare rates without any discount points first
- Ask how much it costs to lower your rate by 0.25% or 0.5%
- Sometimes, paying points can save you money in the long run
Pro Tip About Interest Rates:
Sometimes, you can actually get money back by taking a slightly higher rate! For example, taking a 5.25% rate instead of 5% might get you $3,000 to $5,000 back to help with closing costs.
3. Mortgage Pre-Approval: How to Know Your Home Loan Budget
Before you start house hunting, you need to know what you can buy. Your lender will need:
Your W-2s and tax returns from the last two years
Recent pay stubs
Two months of bank statements
Your credit score
Information about your other debts
They'll use this to tell you exactly how much house you can afford. This helps you avoid falling in love with a house you can't buy!
4. Mortgage Lender Requirements: Location and Property Type Restrictions
Not all lenders can give loans everywhere. Ask about:
- Whether they can lend in your target location
- If they work with the type of property you want (house, condo, etc.)
- Whether they can handle fixer-uppers if that's what you want
- If they do loans for investment properties (if you're not planning to live there)
5. Mortgage Rate Lock: How to Secure Your Home Loan Interest Rate
Interest rates change every day. Here's what you need to know:
- Lenders can "lock" your rate for a certain time
- Most rate locks last 30-90 days
- You usually can't lock a rate until you have a house under contract
- If your loan takes longer than the lock period, you might get stuck with a higher rate
- Always ask your lender to lock your rate as soon as you have a house under contract
