1. Are you being charged points? Be sure to ask your prospective lender whether you are being charged points on the new loan. Many mortgage lenders charge points as part of the mortgage package. One point is equal to one percent of the amount you are borrowing.
2. Can you get your low rate locked-in? A mortgage rate lock-in is a mortgage lenders written guarantee of rates and terms for a specified period of time. Typical lock-in periods are from 10 to 60 days.
3. What is the length of the loan you're being quoted? Most fixed rate loans are quoted at 15 or 30 years. The main advantage of a 30 year loan over a 15 year is that it has a lower monthly payment. Payments on a 30 year mortgage with a 7 percent interest rate are about 25 percent less than a 15 year mortgage.
4. Will I be charged a penalty for prepayment? If you were to pay your loan off early, would you be charged an extra fee?
5. What are the lenders closing fees? These are loan charges paid to the lender such as loan application fee, loan document preparation fee, underwriting fee, processing fee, and the clever miscellaneous fee. You can usually negotiate with lenders to reduce these fees.
With this information you can compare several lenders fees, and determine whether a lower interest rate is being made up in the form of higher fees and closing costs. If so, ask the loan officer to match the fees of the lowest priced lender. Most lenders have quite a bit of flexibility, especially in the area of fees and closing costs. Remember, loan rates and fees are always negotiable.
