OfflineBefore you commit to any lender, here are at least 10 questions you should ask them. If you don't like the answers you receive, then continue shopping for a loan until you find a mortgage broker/lender that you feel comfortable with.
1. Which Type of Loan is Best?
Reputable lenders will find out more about you before throwing out loan options. You wouldn't expect a doctor to suggest surgery before she assessed your medical situation, would you? Choose a lender who gathers enough information from you before she suggests a certain type of loan. Don't be afraid to ask a lender to explain the pros and cons about:
* Fixed-rate loans.
* Adjustable-rate loans.
* Interest-only loans.
* Negative-amortization loans.
2. What is the Interest Rate & Annual Percentage Rate
The annual percentage rate (APR) is derived by a complex calculation that includes the interest rate and all the other related lender fees divided by the loan's term. However, bear in mind that:
Many lenders do not compute APR correctly.
There is no way to accurately compute an APR rate for an adjustable loan.
It does not account for early payoffs.
If your interest rate is adjustable, ask about its:
* Adjustment frequency
* Maximum annual adjustment
* Highest rate (Cap)
* Index
* Margin
3. What are the Discount Points and Origination Fees?
Each "point" is equal to 1 percent of the loan amount. Therefore, 2 points on a $100,000 loan cost $2,000.
Sometimes lenders charge origination fees in addition to points.
Points "buy down" the interest rate, meaning the more points you pay, the lower the interest rate.
Points are also tax deductible, even if the seller pays some or all of the points.
4. What Are All the Costs?
All the costs of a loan include not only fees that go into the lender's pocket but also related third-party vendor fees such as:
* Appraisal
* Credit report
* Lender's title policy
* Pest inspection reports
* Escrow (where applicable)
* Recording fees
* Taxes
An estimate of these fees constitutes the Good Faith Estimate or GFE, which the lender is required by federal law to give to you.
5. Will the Lender Guarantee the GFE?
According to the Real Estate Settlement and Procedures Act (RESPA), lenders have three days after you've applied for a loan to give you the Good Faith Estimate, containing all the costs of your loan. Points to consider:
Since lenders are not required to guarantee GFEs, this document is worth about the cost of the paper on which it is printed.
However, there is a lot of pressure on lenders by consumers to guarantee their GFEs.
If your lender refuses to stand behind its estimate, go elsewhere.
6. Do You Offer Loan Rate Locks?
Interest rates fluctuate and change daily. If you have reason to believe that interest rates are moving up, you might want to lock your loan. Lenders typically charge zero to one point to lock a loan rate and points. Ask your lender:
Do you charge a fee to lock my interest rate?
Does the lock-in protect all the loan costs?
For how long will you lock this rate?
Will you give me the loan lock in writing?
The alternative is to pay the prevailing rate and points on the day your loan funds.
7. Is There a Prepayment Penalty?
In some states, prepayment penalties are no longer allowed, so ask. Typically, prepayment penalties let the lender collect an additional six months of "unearned interest" if you pay the loan off early through a refinance of sale of the property. Be sure to ask:
How much is the prepayment penalty?
What are the terms of the prepay? Some are in effect only during the first 2 to 5 years of the loan.
Would the prepayment penalty apply if I refinanced through you at a later date?
8. Are You Equipped to Approve Loans In-House?
Underwriters review loans and issue conditions before approving or rejecting a loan.
Ask if a lender can handle its own underwriting.
VA and FHA loans typically take longer to process, but some lenders meet government requirements to automatically approve or disapprove a loan without sending it to the VA or FHA.
9. How Much Time Do You Need to Fund?
Average loan processing time periods fall between 21 and 45 days. To properly write a purchase contract, you will need to include a closing date, and that date should be coordinated with your lender. Find out:
What is your anticipated turnaround time?
What obstacles could possibly hold up closing?
How long after final application approval will the loan fund?
10. What is the Yield Spread Premium?
If your loan officer is receiving a yield spread premium (YSP), a commission paid directly by the lender to your representative, this fee will be disclosed on your settlement statement at closing. YSPs are a controversial matter because:
Lenders say if borrowers are happy with the terms, the fact the loan officer receives a bonus is not relevant.
Borrowers say if the loan officer did not receive a YSP bonus, the loan would have cost less.
You should negotiate upfront; at closing is too late.
Elena
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
Thanks for this great post Elena!
Guys and gals, the more I have been researching some investor lending strategies, there are some very interesting way to structure loans with FHAs right now, even for people with bad credit or no money. My thought is, start with a lender who specializes in FHAs because they might be able to reveal some killer options based on what I've seen recently.
I just started to pre qualify with a broker, and I told her I am only considering 100% mortgages. We have a good credit rating around low 700's. My question is, Are all fees included in a 100% mortgage, in other words I want to finance 100% without any money out of pocket. I told the broker that I want to use the lenders money, not mine. She laughed and said good idea. Now she knows I am part of the DG FAMILY and proud of it. Let me know....Jan
Sounds like that should be question number 11 on your list to ask your broker/lender!
I would assume yes, but I'm not a broker/lender either, so correct me if I'm wrong anyone.
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
Question number 11 it is. Anybody out there that know's the answer....Jan
Hay Jan, One thing that will not be covered is the closing cost of the loan. That is usually around 3% of the amount of the loan. To over come this ask the seller to pay for closing costs. To do this you can up your offer price by 3% and to cover the closing cost than that will cover the closing cost for the seller if they are unwilling to origninally do this.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
By the end of 2008 eighteen states will be in The Nationwide Mortgage Licensing System which will help state officials keep track of licensed individuals and companies that arrange mortgages and consumers will have access to the system to avoid unlicensed brokers.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
Thanks for answering that question. Hint: I always ask for three things from the Seller when I buy a property. 1. They pay either all or $3,000 of the closing costs. 2. All appliances stay. 3. They pay for a home warranty for 1 year. I learned this when I bought my duplex and I've done it ever since on every deal.
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
Letterman and others have nothing on the DG family! Elena...if I texted instead of posted, I'd be saying "u r 2 smart!"
Not only are your top 10 the 1st time I've seen it this concise & eloquent, but then you and others added to that wisdom with FHA ideas, closing costs suggestions, and even your last post on appliances, etc. In addition, the things coming down the road keep the DG family well aware of legislation, etc. (alluding to tflood's NMLS update) Things I would have NEVER have thought about! Thanx so much!
wib
"All great social and intellectual movements begin with a group of interested friends." CS Lewis
And we know that for those who love God, that is, for those who are called according to his purpose, all things are working together for good.
Romans 8:28 - International Standard Version (©2008)
But I can't take credit for this one, someone else emailed it to me. I thought it was such great information that I just passed it on to the kind folks here. I usually try to post from my own experience, but on occassion, if someone shares something with me I will pass it on. I am always happy to share but I will not take credit for what's not mine.
Continued blessings,
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
Thank you for sharing it with us. It is great information!
Rina
"Obstacles can slow you down, but they can only stop you with your permission." Dean Graziosi (BARM pg 101)
"For I know the plans I have for you," declares the Lord, "plans to prosper you and not to harm you, plans to give you hope and a future." Jeremiah 29:11
For a little about me, welcome to the site, and a few tips for new DG family members, click on this link: http://www.deangraziosi.com/user/3249
With all the lender questions going around the forum, I just figured since this happened across my desk that I'd share it with others to maybe help clear up some questions we've all had... No big deal, just sharin' with my family is all.
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
I DIGG THIS INFO I"M DEFINTLEY USING THIS TO MY ADVANTAGE
hey thanks for posting that the 10 steps will surly help me out , for example on my prop i got now my percentish went up .5 percent at closing table ,i asked why they said the interst rate changed when were were waiting for the apprser to do hes thing , so ille keep this in mind from now on elana
michael scott sondgeroth
150% determined believe!!! successful most of all have fun!!!!!!!!!
BE A DO,ER NOT A TALKER!!!!!!!!
just wanted to state another fact about FHA loans right now, i just read that FHA is now giving 1st time home buyers $7,500 for DOWN MONEY!, check to see if you qualify
YOUR HERO, SULLY
Thanks Sullmeister, you're the malt liquor of rei! LOL! (I don't even drink) I just meant you're bubbly and full of flavor!!
Psalms 118:23 "This is the LORD's doing; it is marvelous in our eyes."
ya its the best thing ive done ,ya get out and start looking for your first investment prop its a rush !!!
michael scott sondgeroth
150% determined believe!!! successful most of all have fun!!!!!!!!!
BE A DO,ER NOT A TALKER!!!!!!!!
Jan, do you mean to tell me your broker will be able to get you 100% financing on an investment property? If so, PLEASE let me know how! I've inerviewed several banks (yuck) and a mortgage broker here and they have all pretty much told me it could not be done for investment properties. The best I have been able to do is 15% down. I found a property today that was $70,000 below market value so we offered them a little more so they would pay our closing costs and down payment. Usually I won't go up in price, but this one was so low (almost an reo) they couldn't go any lower.
Let me know what's up with that 100% down!
Thanks,
Roni
PS - thanks for the tips Elena!
With all my hyperness, I might have misstated. The 1st deal is for my wife and myself to get out of this rental that we are in. The odd thing here is that I explained to the broker that this property was for my own residence, but I was also looking for a broker to work with for future investments. I could tell that she is kind of new to the business as I am, and she is very accomodating. I talked to her last Thurday 8/14/08 when she gave me our credit scores, (low 700's) and I reinterated to her again that I want 100% financing with no out of pocket. She was very agreeable. I am not sure if she know's where I am coming from, but I am going to pursue this to the end. I will keep you in the loop on this as I get closer to the closing table....Jan
That's what I'm hearing/finding around here, too. When I got my first prop, I had to put 20% down! No way around it (according to "them"). They wouldn't even take 10% since I was a first time investor. I've talked to a couple of brokers in the last week and they both said that it's getting even tougher for investors. Maybe that's just in GA, though.
Emily
ECC Investments, LLC
WHAT SITE LET ME KNOW, CAUSE THE MORE INFO THE BETTER,
Greetings All:
This is dynamite information.
To those who have actually used these questions, are you submitting them in writing to qualify several lenders at once? Are you embedding the questions in the context of a conversation? And, are you utilizing these questions with conventional lenders only or also with funders who do private and hard money?
Thanks for sharing...
Ladyluck
What is the current state of affairs of the lending market compared to when this was written?
That is great information eroberts and I might add that you can also ask the seller to split the cost of closing with you so that you both are putting up 1.5 %.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
Randy Bailiff
Dean Graziosi Real Estate Investment Coach
Where is the update link to this topic on asking a for all closing cost to be covered by the seller? Still reading and maybe just haven't gotten there yet. Thank you and God Bless!
God Bless you all, in Jesus' Name I pray. Nancy as #1 Sunshine*
Thank you for this great and informative demonstration of how to find a good lender. These steps should help me take the right path in the future!
-Marty
Has anybody used private funds (on-line loan) to finance purchases and have been asked to pay for an insurance policy up front...to insure the loan against non-payment due to Death, Bankruptcy, Sickness, Disability, Loss of Job etc.?
Of course I would not send them the money upfront, unless I can verify more info on them with local banks. etc.
Further, that the loan will be transferred to your bank, or by Cashiers Check or Western Union money transfer? I'm specially concerned about "non-payment due to death" coming from an unknown company in another country.
Thanks for your help.
Finding the best mortgage rate can prove to be very challenging to most people and even organizations. A mortgage is an investment and requires a lot of considerations to be laid down before the actualization stage or the implementation of the project for any successful venture.
Whether you are buying your first home or refinancing an existing one, it’s always wise to define the options in place so as to come up with the best mortgage rate which can earn you the value for your money. The main aim of this investment is to improve your credit score, you need to first determine what you can afford. The value of the house that you can afford is important since it will is easier and convenient working with what you are able to manage.
Mortgage Rates
When you have defined the best value of the house that you can afford and manage appropriately, you also need to figure out how much your monthly payments would be. This can be done by using the bank’s mortgage rate calculator. This will assist you in carving out the estimates with which you will be working on.
After you have come out with an estimate of the monthly payments, you need to check your credit score. In case it’s a bit low, you will need to try and bump it up since you need to climb up the ladder. If it is favorable, keep it at that by not closing any credit accounts that you have or applying for new credits.
Proceed then to a comparison of the bank rates of the various banks offering mortgages in your area. This will assist you in getting one or two, which have interests, which are close to the estimates that you had compiled. This will also assist you in getting the bank, which has the terms, and conditions which can be comfortable with you depending on their duration of payments and what their monthly payments are.
This is an investment and you only need options, which you are comfortable working with, and can enable you to earn value for your money within an appropriate time.
When you have settled on the bank with the rates which you feel you can work with, put together all the necessary financial paperwork before meeting with the lending company. The paperwork shall include: Tax returns for the past two years, two most recent pay slips, most recent credit card statements, most recent bank and investment account statements, divorce and child support statements, W-2 income statements and the budget that you have for the investment.
It is not always a guarantee that the lowest mortgage rate is the best but for a conscious investment; lower mortgage rates will ensure that you gain the most benefits out of the mortgage. The determinants, which will enable you to get the lowest mortgage rates, are a good credit score, low debt-to-income ratio and a 20% down payment, which would be very efficient if you are acquiring your first house. With all these, you will have settled on the best rates, which you are able to mange and work with as an individual or an organization. abenson