The emotions attached to the first property you buy in your life are something totally different! The thing is that we all work really hard, struggling constantly, trying to climb the ladder of success, and everything for what?
Probably to have a secure life and fulfil a couple of our dreams and aspirations? Well, buying the first property is always special! A lot of blood and sweat goes into buying a house!
By no means is it possible not to feel overwhelmed when you hold the keys to your own house for the first time! You know all of this already! Right? Just that, sometimes seeing others achieve their dreams gets us a bit emotional!
As well-wishers, there are a few things we would definitely like you to know about.
By now, you must already have read the title, and let us reassure you that it is actually quite important to have a proper, detailed conversation with your mortgage broker before you go ahead with a plan!
There are a number of questions we get from people, and one question we’ve had to answer more than once is (Mortgage brokers vs Banks in Canada: Which is better?). Well, each one has its own advantages, but for now, let’s focus on the questions that you should definitely ask your mortgage broker! Why?
There are certain things that are difficult to understand if you are not well-acquainted with the terms and technical aspects of the real estate industry!
So, Without Further Delay, Let’s Get Into It:
Which Loan Will Suit You The Best
Trust us when we say this: There are a variety of loans available in the market. Not all of them are going to be suitable for you!
Yes! Try and have an in-depth conversation with your mortgage broker and let them explain the different types of mortgages that you could go for.
Once you have a clear picture of the different types of mortgages, you should choose the one that suits your needs and requirements best! Which type of mortgage you choose will depend completely on your choice and your financial condition at the time of taking the mortgage.
Make sure that the one you choose is the one you are the most comfortable with!
How Much Of a Down Payment Should You Make?
Well, this depends to a certain extent on different factors! However, the commonly accepted answer to this question is 20%.
If you have a good credit score, the total amount of downpayment could go down to as low as 3%. While this might seem like a great deal, there are both pros and cons to this! Think about it!
The lesser downpayment you make, the more interest will that you have to pay every month! That is a recurring pressure you would have to keep taking unless you pay off the mortgage!
Moreover, the rate of interest applied on the money borrowed also increases if the down payment you make is low. It is thus advisable that you at least have 20% equity in your house at the time of purchasing it!
What Are The Other Costs
This is an important question that you must ask your mortgage broker! The cost of a loan usually includes the lender fees and some third-party vendor fees, which include appraisals, credit reports, the title policy, pest inspection reports, escrow where applicable, recording fees, and taxes.
Now, according to federal law, the broker must give you a detailed report of the estimate of these fees to the most accurate level in a document called the ‘loan estimate‘.
Lenders are required to deliver the loan estimate when an application is processed, and the estimate should include a number of details of both the lender and the borrower! However, it is advisable that you ask for the loan estimate before you apply for the loan.
Is There a Prepayment Penalty
Another important question you should definitely ask your borrower! Some states do not have prepayment penalties at all! However, in some types of mortgages, a prepayment penalty is applicable for the first two to five years.
This lets your lender earn an extra six months of interest! There are a number of instances when people like to pay off loans, either by getting a refinance or by selling off their property.
So, make sure you get a proper clarification from your borrower regarding prepayment penalties and if you have to pay the penalty even if you get a refinance from the same lender and broker.
How Much Time Do You Need To Get Funded?
Well, it usually takes about one and a half months to get the funding in your account.
However, in order to write a purchase order correctly, you will need to write the closing date! You will need to coordinate with your lender to get the closing date.
In order to be in a safe scenario, ask about how long the turnaround period could be if there are any obstacles that could hold up closing and an approximate idea of how long it could take for the loan to be funded after the final application approval.
Can You Lock Your Loan Rate?
Interest rates change and fluctuate on a daily basis. If you feel that the interest rates might go up in the future, you might want to lock in on your stipulated interest rate.
However, before you do that, make sure that you ask your broker a few questions, including whether there’s a charge fee, whether the lock-in covers all costs, how long the loan will be locked in, and whether they’ll give you proof of the lock-in in writing! Brokers usually charge up to one point for a lock-in.
What Are Discount Points And Origination Fees For Mortgage Brokers?
A single discount point usually amounts to 1% of the loan amount. Points are tax-deductible and buy down the rate of the interest!
This means that the more points you pay, the less will be your interest rate! What are origination fees? These are fees charged for the processing of the loan.
These are also known as lender fees, and the rate often stays between the range of 0.5% to 1% of the loan amount. Make sure you clearly have a conversation with your mortgage broker to get a clear picture of these details.
What Are The Interest And Annual Percentage Rates?
This one is a bit complicated! Why? A loan’s annual percentage rate is usually derived by undergoing a lot of complicated calculations.
Most of these calculations might be difficult to understand! These calculations include the interest rate and other fees related to the lender. APRs are not calculated the same way by all brokers.
Moreover, APRs cannot be calculated accurately for adjustable mortgages. So make sure you ask your broker to explain everything with regard to this matter in a detailed way.
Final Words
Now, these are some of the most important questions that you should most definitely ask your mortgage broker. However, we understand that there could be a plethora of more questions and queries that you might have before fixating upon the loan you choose.
So, if you have finalized the house you would like to buy, and if these questions are spiralling in your mind, do visit us. We’d be more than happy to have a detailed conversation and answer any and every question that you might have.
As we mentioned earlier, seeing someone achieve their dream really makes us happy. If you think you need a mortgage, do allow us to play a small role in the process of you achieving your dream.
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