c  What’s the APR (annual percentage rate) on this mortgage? Be skeptical of the first rate you’re quoted. Always ask if it’s the annual percentage rate. The APR is usually higher because it includes the additional fees involved in procuring a loan. And don’t always believe the APR quoted in ads. Lenders often use bait and switch tactics: they’ll quote a low rate to get you in the door, but it may not include all the points and fees, or it may be almost impossible to qualify for.

 

 

 

c  How much of a down payment will I need? Most mortgages require a down payment of somewhere between 5% and 20% of the loan amount. The higher your down payment, the more attractive your rate and terms will be. However, you may not be able to afford a high down payment. If you can’t manage a down payment of 20% or more, your mortgage is required to be covered by private mortgage insurance (PMI), which will involve paying an insurance premium.

 

 

 

c  How much extra will it cost to lock in my interest rate? As you know, mortgage rates are changing all the time. If rates rise between the time you apply and your closing date, you can pay thousands of dollars extra over the life of your mortgage. Most lenders will let you lock in the rate you discuss at the time you apply so there are no surprises later. But there’s often a fee for this, so find out how much it might cost.

 

 

 

c  Are you going to charge any discount points? Some lenders charge prepaid mortgage interest points that can have a big effect on the cost of your loan. Ask for full details.

 

 

 

c  What are the guidelines I need to meet in order to qualify for this mortgage? Every mortgage has requirements that relate to your employment, income, down payment, credit history, assets and liabilities. First-time home buyer programs, VA loans and other government-sponsored mortgage programs typically offer easier qualifying guidelines than conventional loans.

 

 

 

c  Can you give me an estimate of my closing fees? Every mortgage involves fees that are paid to the lender and other companies involved in the financing process. Ask for a realistic estimate of what those fees will be, based on the specific mortgage details you’re talking about. Any lender that can’t provide an estimate should be viewed with suspicion.

 

 

 

c  How much will it cost to pay out this mortgage before the term is up? Sure, you may not plan to pay out your mortgage early, but what if you need to move or refinance unexpectedly. Some mortgages with low rates have HIGH prepayment penalties which make getting out of the mortgage VERY expensive. If your plans could change, it may make sense to pay a slightly higher rate and get a more affordable prepayment penalty. Be  sure to ask about the terms and conditions of any prepayment penalty.

 

 

 

c  What documents will I need to provide? Every mortgage requires you to provide some documents. But the number of documents can vary. As the name suggests, “Full Doc" loans require full documentation of income, assets, debt payments, credit history, etc. “Low Doc” loans require a minimum of documentation. However, you normally have to have very good credit and a large down payment to qualify for a Low Doc loan—and they can also carry a higher interest rate. Make sure you find out all the details.

 

 

 

c  How long will it take to process this mortgage? Once your mortgage application is approved, it can take from two weeks to two months (or more!) to process and fund the loan. Because you’re going to be on a deadline (the closing date of your house), ask the lender for an accurate processing timetable. This will also help you decide whether you need to lock in your interest rate.

 

 

 

c  What are some of the things that could slow the approval process? Nobody likes surprises, especially lenders! If the information you’ve provided is complete and accurate, there should be no delays. But changes to that information can really make a difference. If during processing, your income changes, you take on a new debt, you get married or divorced, or an undisclosed credit problem comes to light, there will be delays. Make sure you know exactly what the lender needs, so you don’t accidentally leave anything out.