When getting a mortgage no matter whether it’s your first one or you’ve “been there, done that” there are some thing you should know before you proceed with signing on the bottom line.
- What is my interest rate and what are my closing costs?
In general, you can get a lower interest rate if you can pay your closing costs on a refinance and points on a purchase. If you are quoted a loan with points, make sure you ask what the interest rate is if you don’t pay points. The thumb rule here is if you aren’t going to stay in the house for longer than 4-5 years then paying points isn’t worth it.
- Do I have a fixed rate mortgage, adjustable rate mortgage or an interest only mortgage?
For sure you will want to know which type of mortgage you are getting. Most people get fixed rate mortgages because they are the most stable and consistent of all the mortgages you can get. Fixed rate mortgages usually have slightly higher interest rates than other types of mortgages but you can count on your mortgage payment staying the same for the entire period of time you are paying on it. Adjustable rate and interest only mortgages have varying payments over time which could be a problem for you in the future. In general, if you know you aren’t going to be in a home that long you could consider an adjustable rate mortgage or an interest only loan. Make sure you fully discuss your options with your loan officer. If you have a financial planner you may want to touch base with them too.
- When is my payment due?
Typically mortgage payments are due the first of every month and you have a 15 day grace period to get your payment made. Once you hit the 16th day you are into the penalty period which means you’ll most likely have to pay some nominal service fee of say $25-$35 plus your mortgage payment (each lender is different). If you pay your mortgage payment during the penalty period your credit is still fine and there’s nothing to worry about. However, once you go over the 30th day from your mortgage payment being due you now are late on your payment. If you are late on your payment you’ll most likely have a bigger fee to pay to get the bank to accept your payment and you’ll need to pay everything in full unless you work out something with your lender. Also, once you are 30 days late your mortgage company can report your late payment to the credit bureaus which will likely result in a drop in your credit scores. At all costs – avoid being more than 30 days past your due date.
- Are there any pre-payment penalties with my mortgage?
Typically, pre-payment penalties don’t apply to conventional, jumbo, FHA, VA, or USDA first mortgage loans. However, make sure you ask your loan officer if your loan will have a pre-payment penalty. Most pre-payment penalties apply for 3-10 years and can be enforced if you pay off your mortgage during the penalty period or make a large principle payment.