Question to Ask When Shopping for a Mortgage

When shopping for a home mortgage make sure you obtain all the relevant information:

• Research current interest rates. Check the real estate section of your local newspaper, use the Internet, or call at least six lenders for information.
• Check the rates for 30-year, 20-year and 15-year mortgages. You may be able to save thousands of dollars in interest charges by getting the shortest-term mortgage you can afford.
• Ask for details on the same loan amount, loan term, and type of loan from multiple lenders so that you can compare the information. Be sure to get the Annual Percentage Rate (APR), which takes into account not only the interest rate but also points, broker fees, and other credit charges expressed as a yearly rate.
• Ask whether the rate is fixed or adjustable. The interest rate on adjustable rate mortgage loans (ARMs) can vary a great deal over the lifetime of the mortgage. An increase of several percentage points might raise payments by hundreds of dollars per month.
• If a loan has an adjustable rate, ask when and how the rate and loan payment could change.
• Find out how much down payment is required. Some lenders require 20% of the home's purchase price as a down payment. But many lenders now offer loans that require less. In these cases, you may be required to purchase private mortgage insurance (PMI) to protect the lender if you fall behind on payments.
• If PMI is required, ask what the total cost of the insurance will be. How much will the monthly mortgage payment be when the PMI premium is added and how long you will be required to carry PMI?
• Ask if you can pay off the loan early and if there is a penalty for doing so.

There is a long list of sources for mortgages loans: mortgage banks, mortgage brokers, banks, thrifts and credit unions, home builders, real estate agencies and Internet lenders.