Can you explain the terms of my loan?
The new rules have allowed for more transparency in the process meaning you are less likely to fall victim to bait and switch techniques at closing; plus, you’ll have a better sense of the fees and costs you can expect. Before your application goes to the underwriter you will receive an email that includes a summary of the fees and terms that will be coming your way. With the new rules there are also fewer loan programs and options for you to choose from. This will help you from getting lost along the way as the standard 15, 20, and 30 year fixed options and a few adjustable rate options are available to you. Sit down with your lender to figure out what your specific terms are and if there is anything out of the ordinary about your loan that you need to know. You should keep in mind that you shouldn’t sign your application until you know exactly what you’ll be getting from the loan.
How long will my rate be good for?
With interest rates changing every day, sometimes multiple times a day, you need to figure out how long your quoted rate will be good for. Once your credit has been pulled and a few other details are learned your lender will give you an estimated interest rate. This estimate will be based on your credit score, down payment, and debt to income ratio; if you don’t meet any of these requirements you’ll be quoted higher than advertised. While this means you can shop around a bit most lenders won’t differ much more than a point from each other. Ask your lender how long your quoted rate will be good for as your rate won’t last forever; most rates are locked for 30, 45 or 60 days. Keep in mind that the longer the rate lock the higher the rate. This is important because it’s one of the most important factors in determining your monthly rate so you need to make sure you completely understand your interest rate.
How long will it take to close?
Since every loan application is different, the timeframe will vary as well. The type of income you receive, the appraisal on the property, or the title can all effect the process and delay your timeframe so keep this in mind. One thing you need to ask before choosing a lender is what type of timeframe until closing you can expect. Once you know this you’ll be able to make better decisions on the lender, offer and which rate lock to accept.
What fees and costs can I expect?
With the new transparency rules it is much easier to anticipate what costs and fees to expect at closing. By law the total fees that you were given at submission must be within a percentage of the actual numbers on you HUD statement at closing. This is a huge benefit to you because the numbers at submission are no longer a complete estimation of fees; they are more accurate. Depending on your loan size and application profile the average loan fees to the lender are around 1.5% of the loan amount. Due to the new transparency you’ll be able to shop around for the best closing fees and costs, too.
What paperwork do I need to provide?
Before you get too deep into the process be sure to ask your lender what documents and paperwork you’ll need to provide. In most cases you’ll need to present your tax returns, bank statements, and current income paperwork, as well as further documentation. It’s important that you ask your lender exactly what you will need to present so that you have time to get everything together.
It’s hard to pass up buying a home in today’s market with the low interest rates and new rules so long as you know what you are doing in the process. Educate yourself about the home buying process before you get started and make sure that you understand your role. Once you feel confident enough to start working with a lender, be sure to ask these five questions along the way. Remember that if you have any questions or issues through the process be sure to ask questions and make sure that things are fully explained to you.