TEN QUESTIONS TO ASK BEFORE GETTING A LOAN
Mortgage

TEN QUESTIONS TO ASK BEFORE GETTING A LOANINTRODUCTIONBefore you take what is considered a major leap for home buyers - getting a loan; it's important that you reflect on a few questions.This article spotlights 10 of such questions and gives you lots of actionable insights on the possibilities and threats that trail each question.This article is essential because it walks you through the reflective moments that should ordinarily attend thoughts of getting a loan.When you're through with this article, you would have completed a crash course on critical questions home buyers must answer, one way or the other, before getting a loan.Here are the questions:10. What is a mortgage?This is the ground-zero where every aspiring home buyer who wants to get a loan has to start from.Simply stated, a mortgage is a loan secured by real property.A mortgage is made up of both the principal and the amount. When an aspiring homebuyer secures a mortgage, he undertakes monthly payments to offset the principal and the interest until he has full equity in the property.It's crucial for you to understand what a mortgage is before you even start contemplating getting one.9. What does it mean to pre-qualify for a mortgage?Pre-qualification, as far as a mortgage is concerned, means an informal way of determining the amount of money an aspiring home buyer might be able to borrow from a lender.Pre-qualification is a step that can be carried out over the web or even a phone interview, without need for verification, between a prospective borrower and a potential lender.However, if a lender pre-qualified an aspiring home buyer for a loan doesn't mean he is obligated to follow through with loan disbursement. 8. What is Pre-approval, and do you need it? While pre-qualification is merely an informal routine often bearing just symbolic significance, pre-approval is a formal application and a lender's assurance to loan anyone interested in borrowing for a house purchase a certain amount of money.This process requires you, the aspiring home buyer, to provide relevant financial records so that a lender can investigate your creditworthiness.Bear in mind that there's more to a mortgage than pre-approval; the real estate will be appraised to determine its value as the property's value is the security for the mortgage.7. What is included in Mortgage Payments? As earlier noted, Mortgage Payments are made monthly by people with an active mortgage (they risk foreclosure if they don't keep up with payments) and the payment ordinarily consists of the principal and the interest. But that's usually not all; you will have to pay real estate taxes, pay homeowner's insurance and if your mortgage was preconditioned on a Private Mortgage Insurance, you will have to make payments for that too. 6. Are there Special Mortgage Packages for First Time Home Buyers?As you might have guessed, a market economy is filled with lots of special offers and deal sweeteners, designed to draw the newbies' attention and convert them into lifelong customers.Lots of lenders now offer affordable mortgage options for people buying a home for the first timeSome States and Cities have designed programs that lure first time home buyers to their respective jurisdictions, using incentives such as reduced closing costs, low down payments,tax breaks and refunds, to mention a few.5. What happens if you pay your mortgage ahead of schedule?Even though you're still in the process of securing a loan, it's not too early to pursue the above line of questioning.The devil they say is in the details, what will happen if you pay your mortgage ahead of schedule will be somewhere in the mortgage contract. However, most lender's allow borrowers to pay their mortgage ahead of schedule while some work a prepayment penalty into the terms of the loan.A prepayment penalty involves you paying a particular amount for paying your mortgage ahead of schedule. Still, if that arrangement doesn't appeal to you, you can object to it before signing the contract. 4. What is the effect of the interest rate on my mortgage loan?Generally speaking, you're allowed to borrow more money for your home purchase when the interest rate is down (if your loan is a fixed-rate mortgage) and that means you'll still make the same monthly mortgage payments if the interest rate goes up.The above conclusion differs with the type of mortgage you subscribe to.Usually, when you're shopping for a mortgage that suits you, the interest rate may fluctuate, but a lender can lock in your interest rate to protect the deal from the adverse effects of such fluctuations. 3. How can you compare Mortgage Rates when shopping for a mortgage?The usual way is to interact with different mortgage lenders and compare the information gleaned from each interaction.You can record the names, addresses and loans types of the lenders you interacted with.Also, keep in mind that it's important to record and compare the types of loans each lender offered, their respective interest rates, the insurance they require or don't require, among other things.You can also check out reputable websites dedicated to comparing Mortgage Rates by region.As always, only fill out the loan application form when you're done comparing offers and have selected the offer that speaks to your situation. 2. What types of loans can I get? Mortgage lenders have something for everyone, but the mainstream offers are the fixed-rate and the adjustable-rate mortgage loans. Other exotic types of mortgages, also known as hybrid mortgages, can be accessed by home buyers.These exotic loans include but are not limited to the jumbo mortgage, construction mortgage, balloon mortgage, two-step mortgage etc.One can also access Federally Funded Assistance like the Federal Housing Administration mortgages, Department of Veteran Administration mortgages and the Rural Housing and Community Development Scheme if you happen to meet their requirements. 1. How can I get a low-interest rate for a loan?To a reasonable extent, high credit score and a substantial down payment (20% of the property's purchase price) qualifies you for a low-interest rate from a mortgage lender since the above fact doesn't depict you as a high-risk borrower.Closing ThoughtsThe questions we have discussed in this article are not representative of all the questions you should ask when getting a loan, but they give you a balanced view of what the process is all about.

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