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How To Obtain A Mortgage

Details To Look At Before Agreeing To A Loan

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Before agreeing to a mortgage, consider all of the details - including the fine print. You don't want to be surprised in the future, especially at times when you can least afford them.

For instance, consider:

  • The interest rate (how much you pay for a loan of the money).
  • Annual Percentage Rate (APR) - the annual rate you pay. This rate includes the interest and other lender fees divided by the term of the loan.
  • If your rate if adjustable:
    • On what basis does the rate adjust?
    • How often can it adjust?
    • What is the maximum adjustment allowed with each adjustment?
    • What is the maximum cap for all adjustments?
    • What fees and other costs to you have to pay, including but not limited to:
      • Origination fees
      • Points
      • Appraisal costs
      • Credit report
      • Title Insurance
      • Inspection reports
      • Recording fees
      • Taxes

Also ask:

    • Will the lender guarantee the estimate for these fees (referred to in the industry as Good Faith Estimate (GFE). If the lender doesn't guarantee the GFE, you don't really know what costs will be when you are ready to close on the loan.
    • Will the lender agree to lock in the rate and other terms? If so, for how long a period of time? (This is to assure that if rates fluctuate, you will receive the rate you were quoted).
    • Is there a pre-payment penalty? If so, in what amount?
    • What could possibly hold up the loan?
    • How long does it take after my application is finally approved until you write the check?
    • Will anyone be paid a fee with respect to my loan? (If so, you can try to negotiate the fee lower. All costs will be reflected in the loan terms - in other words, you'll pay one way or the other).

Fine points to look at include what happens if you default in a payment. Lenders usually build in the right to be repaid their expenses for collection, including lawyers' fees. These features can add a lot of cost to your debt.

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