The more you know about the home buying process the less surprises there will be. When you get an interest rate quote from a lender how do you know if it’s good? More importantly, how do you know that you are not being taken advantage of. Here are two simple questions to ask.
- What are the fees associated with getting a mortgage?
There are a whole slew of closing costs associated with the purchase of real estate. The only costs that a lender can control are the fees associated with the origination of the mortgage. All these fees will be found in section A of the Loan Estimate (LE). Some examples of these fees are:
- Processing Fee
- Underwriting Fee
- Application Fee
- Document Preparation Fee
- Wire Transfer Fee
These fees can add up to hundreds and sometimes thousands of dollars. A lot of these fees are non-sense and an opportunity by the lender to make more money. The lender is already winning because they are originating your loan. A great lender has little or no fees at all.
2. What would my interest rate be today with no points?
It is very important to say, “with no points” which begs the questions, what is a point? A point represents 1% of the loan amount. On a $400,000 loan 1 point is $4,000. Often times lenders will quote you an attractive rate and not tell you that the rate will cost you at closing 2 points. Asking what the rate is with no points also helps in comparing rates from different lenders.
Rates vary based on the following: (Any lender should be able to give you rates based on these answered items)
- Loan Amount
- Credit Score
- Type of property (Single family or condo)
- Down Payment
- Primary, Secondary, or Investment property