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Wednesday, May 24, 2006

Questions To Ask Your Mortgage Company or Loan Officer

As interest rates continue to increase, many homeowners are scrambling to refinance their adjustable rate mortgages and home equity lines.  With that in mind, here is some information everybody should know when looking for a mortgage lender.

Don't be afraid to ask the Loan Officer to explain anything and everything that you do not COMPLETELY understand.  When shopping for a loan, you will hear many terms...VA, FHA, conventional, ARM, HELOC, points, fixed rate, adjustable, balloon, PITI, etc.  All of this can be very confusing and people are often hesitant to ask questions because they don’t want to appear stupid.  Financing a house is a huge, long-term investment.  And as the cliche goes, the only stupid question is the one not asked.  As a matter of fact, you should ask questions even if you DO know the answer.  This is a good way to find out if your Loan Officer knows what they are talking about and if they’re being straight with you.  After all, it is your hard-earned money.  Three very important questions to ask are:

1.  Is the loan a fixed-rate or adjustable?
2.  Is there a pre-payment penalty?
3.  What is the Annual Percentage Rate (APR)?  This is not the same as the "interest rate" you were quoted.

Ideally, you want to find the lowest interest rate with the lowest possible closing fees.  The APR is the best way to compare loan programs because it reflects both the interest rate and other fees as one combined figure.  In other words, it reflects the actual cost of your loan.  BE CAREFUL!  Many lenders will quote a low interest rate and then nail you with other fees (the small print!)  This can easily make your loan more expensive than a program with a higher interest rate.  The lower the APR, the lower the total cost is to you.  Your lender should tell you the APR in addition to the interest rate.  The amount you will have to pay for a loan is closely related to your credit-worthiness.

Also be aware that mortgage lenders should provide you with a document called a "Good Faith Estimate".  Although this is only an estimate, it tells you, in writing, the costs and fees you can expect to pay at closing (but it may not include some title company fees).

There is a great deal more to know about mortgages and home financing.  But the information above is a good start.  Be sure to check back tomorrow to read about who really benefits from builder loan incentives - the buyer or the builder!

Visit Shannon Hubbard's Home Page     Written By: Shannon Hubbard

Great American Realty, Inc.

Cell: (480) 695-6672
Email me

Posted by Shannon Hubbard, AZ Realtor & Computer Guru on May 24, 2006 | Permalink


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» Builder Loan Incentives - Who Really Benefits? from BlogArizona.com - An Arizona Real Estate Blog
I meant to post this article yesterday, but it was a crazy day! Better late than never... As inventories go up and homes stay on the market longer, sellers are finding it harder to attract buyers. As a result, sellers [Read More]

Tracked on May 26, 2006 11:25:21 AM


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