Signing off on a mortgage agreement and taking possession of a house is a big deal. So much so that calculated care needs to be taken to make sure you’re making a safe investment. Part of the American Dream is to someday own a house, and it’s an achievement that not everyone is fortunate enough to experience.
If you are privileged enough to be in position to buy a piece of real estate, make sure you properly assess and analyze your mortgage agreement, and lender. You have the right to ask questions, and should do so whenever and wherever possible. Below I list some major questions to ask any prospective lender, and why it matters.
- Are you licensed by the state? This one seems simple, but you’d be surprised. For someone arranging a massive financial transaction that can shape the rest of your career and life, it’s critical that you make sure they are licensed. The best way to do this is to ask them in person. This way it’s clear that you are on top of the situation. You’ll also get a straight answer.
Why it matters: You not only want, but need, a licensed mortgage lender. Anyone doing so illegally can break your account, and the law.
- Who do you represent? You always want to know the motive of a mortgage lender. Part of establishing this is to find out who the specific person represents. Ask him or her, even casually, who specifically they work for and who’s on the back end of the transaction.
Why it matters: In any large scale business deal, it’s important to understand the particular motives of the provider. A mortgage agreement is no different, and it’s imperative to know who the lender is directly working with. This can help clarify the overall structure of the agreement.
- Can you give me a rundown of your fees? And a copy of the information? Like any business decision, it’s always a good idea to have any associated fees explained very clearly. Again, you have the right to be particular with your questions. After all, it’s your money and the lender is performing a service for you. Take this into account when you meet him or her and put yourself in the most ideal situation. You deserve it.
Why it matters: You want to understand what fees you are paying. You need to know why, when and how much the fees are during this phase of a pending mortgage agreement.
- What is the interest rate I’m looking at? How was it determined? Whether it’s risk or simply the market, the interest rate on your mortgage is the cost you will pay to borrow money. The interest rate can be higher for a higher risk situation, but it can also be determined by a number of other factors. Be sure to find out what these factors are for your particular situation, because it could help explain your interest rate.
Why it matters: It’s so important to understand your interest rate. After all, it determines the amount of money you will pay for the lending service. Make it a priority to understand its components.
- What are my monthly payments? Arguably, the most important question to ask any prospective lender is how much money you will be spending each month. When you get a number, you need to apply that value into your budget and job status. Make sure you feel comfortable meeting the financial demands of a mortgage agreement before you sign on the dotted line.
Why it matters: A mortgage requires consistent budget alterations for many years. It’s a wise decision to consult family about ways that mortgage payments could affect lifestyle in the coming years.
Signing a mortgage agreement is one of the most exciting decisions that you’ll ever experience in your life. Having said that, it’s a top priority to make a calculated decision. The strategy of making a good choice when entering a mortgage involves asking the lender appropriate questions. These are some ideas to help you succeed.
Tim Richmond writes about the mortgage industry, real estate, green building, personal finance and home ownership. He currently writes for the Native American mortgage specialists 1st Tribal Lending.