Things That You Need to Ask Your Mortgage Lender

Not all people who apply for a mortgage are already familiar with it. Some don't even know the terms that lenders use. So in order to know what you’re getting yourself into, you have to ask the right questions when you’re applying for a mortgage. But what are the things that you need to ask the lender about?

Know the Interest Rate on the Alabama USDA Mortgage

Ask the lender what their estimate is on your loan. They would usually break it down to you to make sure that you understand it. Your mortgage mainly consists of interest rate, principal balance, taxed and fees. It would also include your loan’s annual percentage rate. This states the interest rates, fees, mortgage points and even other charges that are included in your monthly mortgage payment.

Ask Details about Discount and Origination Points

Discount points are a great way to reduce the interest rate. However, you have to pay a certain amount to get the discount points. One discount point is equal to 1 percent of your total loan amount. So if your mortgage is $200,000, you have to pay a fee of $2,000 because that’s the 1 percent of your total loan amount. On the other hand, origination points are fees that are charged by the lender to cover the expenses of your total loan amount.

Know if You Can Lock the Interest Rate

Interest rates are subject to change because of the housing’s fluctuating market. So the interest rate that was originally provided you with might be different a few weeks once you’re about to make a down payment. So to prevent that from happening, you can ask your lender if you can lock the rate including the points for a specific period. Certain fees may apply so it would be best for you to contact the lender about it.

Know the Minimum Down Payment for the Loan

Most lenders in every state including Alabama would ask you to put in at least 20 percent as an initial down payment. However, there are loaning programs that you can take advantage of if you’re not capable of paying the down payment. FHA mortgage loans do offer down payments for as low as 3 percent for people who can’t afford to pay the down payment required by most lenders. However, doing so may increase your monthly mortgage payment instead.

Ask What Documents are needed to Apply for a Loan

Once you’ve applied for a loan, your lender would require you to submit some documents and paperwork to have it processed. Real estate agents in Huntsville would often advise their clients to prepare the necessary documents beforehand. These may be related to their source of income, employment, assets, and their credit report.