Be informed before you buy
What are some questions you should ask and information you should gather before meeting with your mortgage broker, lender or consultant about buying or refinancing your home?
We spoke to one of the top mortgage brokers in the U.S. to find out what information you need to prepare yourself with and what you should expect before you embark on this life-changing journey.
How long have you been in the business?
According to Michelle Morris, a broker with 20 years of experience, who ranks in the top four in the U.S., in this day and age, having experience and evolving through the mortgage process is priceless.
Tip: The best solution is to find someone that is both — a mortgage broker and a mortgage lender — so you can have them shop all the loan products available, and you don't have to.
Are you a mortgage broker, mortgage banker or loan officer?
Knowing the difference between the three is important knowledge to a potential buyer or current homeowner. A mortgage broker is essentially a one stop shop due to the fact that a broker can shop loan options from different entities and is not tied to one product. A mortgage banker has access to only their specific loan products and a loan officer is a representative of either a broker or a banker.
What is the interest rate today?
These days an interest rate depends so much on the persons involved and the individual variables. Here are some factors that can affect what your interest rate will end up being:
These are just some of the variables that are considered when pricing out and obtaining an interest rate. According to Morris, you know you're in good hands if your loan officer or mortgage broker gives you a Good Faith Estimate, in writing, outlining current interest rates with terms and all fees, after he or she takes all your pertinent information.
What type of loan is best for me?
While it's important to ask this question, the answer will depend on your variables, but mainly on your down payment amount and loan amount. "Once all the variables are gathered, and if the Loan Officer takes a thorough interview with your goals and wishes in mind, he or she will suggest what is available for you," said Morris.
Can I lock in a rate before finding a house because rates are so low?
Yes, this is possible, according to Morris. You just need to make sure your loan officer or broker offers rate protection for buying or refinancing in the event rates change.
Tip: Keep in mind that VA loans, FHA loans and conventional loans all differ when it comes to points and penalties, but you never want to end up surprised.
Is there a prepayment penalty?
This is an extremely important question for potential buyers. "Once all the variables are reviewed, the loan officer or broker should clearly explain all the points of the loan," Morris points out.
What are my closing costs?
Once all the information is gathered, assembled and delivered to the loan office or broker, the Good Faith Estimate should outline and disclose if you will be paying any points for a rate quoted and define all fees associated with obtaining that loan.
Can you provide a preapproval letter?
"You should see a loan officer or broker that has the capability to actually get your loan approved with the variables and the documents he or she has requested from you," says Morris. This process is called a DU Approval and it's extremely important to have because it will help get you ahead of the game when you are trying to negotiate a contract or purchase a home. "When you find your dream home and want to make an offer, the approval letter acts as a verification of your assets for a down payment and closing costs. The DU Approval gives you the tools to get your offer accepted," she continues.
What's the difference between a preapproval and an approval?
A lot! An approval is the process through preset underwriting guidelines that actually approves your loan based on the information you provide to your loan officer.
What does a mortgage lender consider when making loan decisions? A lender generally looks at three areas:
About Michelle Morris: Michelle is based in San Diego and is ranked in the Top 4 Mortgage Brokers in the U.S. under PHH Home Mortgage, the fourth largest mortgage company in the U.S.
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