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Some lenders require 20 percent of the home’s purchase price as a down payment. However, many lenders
now offer loans that require less than 20 percent down--sometimes as little as 5 percent on conventional loans.
If a 20 percent down payment is not made, lenders usually require the home buyer to purchase private
mortgage insurance (PMI) to protect the lender in case the home buyer fails to pay. When government-assisted
programs such as FHA (Federal Housing Administration), VA (Veterans Administration), or Rural Development
Services are available, the down payment requirements may be substantially smaller.
Ask about the lender’s requirements for a down payment, including what you need to do to verify that funds for
your down payment are available.
Ask your lender about special programs it may offer.
If PMI is required for your loan
Ask what the total cost of the insurance will be.
Ask how much your monthly payment will be when the PMI premium is included.
Next: Obtain the Best Deal That You Can
Back to: Mortgage Overview
now offer loans that require less than 20 percent down--sometimes as little as 5 percent on conventional loans.
If a 20 percent down payment is not made, lenders usually require the home buyer to purchase private
mortgage insurance (PMI) to protect the lender in case the home buyer fails to pay. When government-assisted
programs such as FHA (Federal Housing Administration), VA (Veterans Administration), or Rural Development
Services are available, the down payment requirements may be substantially smaller.
Ask about the lender’s requirements for a down payment, including what you need to do to verify that funds for
your down payment are available.
Ask your lender about special programs it may offer.
If PMI is required for your loan
Ask what the total cost of the insurance will be.
Ask how much your monthly payment will be when the PMI premium is included.
Next: Obtain the Best Deal That You Can
Back to: Mortgage Overview
Obtain All Important Cost Information
Be sure to get information about mortgages from
several lenders or brokers. Know how much of a
down payment you can afford, and find out all the
costs involved in the loan. Knowing just the amount of
the monthly payment or the interest rate is not
enough. Ask for information about the same loan
amount, loan term, and type of loan so that you can
compare the information.
several lenders or brokers. Know how much of a
down payment you can afford, and find out all the
costs involved in the loan. Knowing just the amount of
the monthly payment or the interest rate is not
enough. Ask for information about the same loan
amount, loan term, and type of loan so that you can
compare the information.
transactions rather than lending money directly; in other words, they find a lender for
you. A broker’s access to several lenders can mean a wider selection of loan products
and terms from which you can choose. Brokers will generally contact several lenders
regarding your application, but they are not obligated to find the best deal for you
unless they have contracted with you to act as your agent. Consequently, you should
consider contacting more than one broker, just as you should with banks or thrift
institutions.
you. A broker’s access to several lenders can mean a wider selection of loan products
and terms from which you can choose. Brokers will generally contact several lenders
regarding your application, but they are not obligated to find the best deal for you
unless they have contracted with you to act as your agent. Consequently, you should
consider contacting more than one broker, just as you should with banks or thrift
institutions.
The following information is important to get from each lender and
broker:
Rates
Ask each lender and broker for a list of its current mortgage interest rates and whether
the rates being quoted are the lowest for that day or week.
Ask whether the rate is fixed or adjustable. Keep in mind that when interest rates for
adjustable-rate loans go up, generally so does the monthly payment.
If the rate quoted is for an adjustable-rate loan, ask how your rate and loan payment
will vary, including whether your loan payment will be reduced when rates go down.
Ask about the loan’s annual percentage rate (APR). The APR takes into account not
only the interest rate but also points, broker fees, and certain other credit charges that
you may be required to pay, expressed as a yearly rate.
broker:
Rates
Ask each lender and broker for a list of its current mortgage interest rates and whether
the rates being quoted are the lowest for that day or week.
Ask whether the rate is fixed or adjustable. Keep in mind that when interest rates for
adjustable-rate loans go up, generally so does the monthly payment.
If the rate quoted is for an adjustable-rate loan, ask how your rate and loan payment
will vary, including whether your loan payment will be reduced when rates go down.
Ask about the loan’s annual percentage rate (APR). The APR takes into account not
only the interest rate but also points, broker fees, and certain other credit charges that
you may be required to pay, expressed as a yearly rate.
Points
Points are fees paid to the lender or broker for the loan and are often linked to the interest rate; usually the more
points you pay, the lower the rate.
Check your local newspaper for information about rates and points currently being offered.
Ask for points to be quoted to you as a dollar amount--rather than just as the number of points--so that you will
actually know how much you will have to pay.
Fees
A home loan often involves many fees, such as loan origination or underwriting fees, broker fees, and
transaction, settlement, and closing costs. Every lender or broker should be able to give you an estimate of its
fees. Many of these fees are negotiable. Some fees are paid when you apply for a loan (such as application and
appraisal fees), and others are paid at closing. In some cases, you can borrow the money needed to pay these
fees, but doing so will increase your loan amount and total costs. "No cost" loans are sometimes available, but
they usually involve higher rates.
Ask what each fee includes. Several items may be lumped into one fee.
Ask for an explanation of any fee you do not understand.
Points are fees paid to the lender or broker for the loan and are often linked to the interest rate; usually the more
points you pay, the lower the rate.
Check your local newspaper for information about rates and points currently being offered.
Ask for points to be quoted to you as a dollar amount--rather than just as the number of points--so that you will
actually know how much you will have to pay.
Fees
A home loan often involves many fees, such as loan origination or underwriting fees, broker fees, and
transaction, settlement, and closing costs. Every lender or broker should be able to give you an estimate of its
fees. Many of these fees are negotiable. Some fees are paid when you apply for a loan (such as application and
appraisal fees), and others are paid at closing. In some cases, you can borrow the money needed to pay these
fees, but doing so will increase your loan amount and total costs. "No cost" loans are sometimes available, but
they usually involve higher rates.
Ask what each fee includes. Several items may be lumped into one fee.
Ask for an explanation of any fee you do not understand.
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Home Mortgages: Looking for the Best Mortgage
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