You’re buying a home. That’s great! But there are a lot of steps involved between “This is IT, honey!” to picking up the keys from escrow. If you’re a first-time homebuyer – or even if you’ve been through the whole process many times before – because of changes in the laws governing the mortgage loan industry, there are some very critical questions you should still be asking your mortgage lender – every lender, every time. The answers can mean the savings of literally thousands of dollars for you. (Hear that? It’s the sound of the new furniture you can spend that money on instead!)
Question #1: “Do I have to use the lender who issued my pre-qualification letter?” The short answer is: Nope. You have all the power in your hands to shop around for the best mortgage loan for you – just as you would do to find the best deal on a car or a big-screen television. And that is power that can save you hundreds or thousands of dollars. When you’re in the service business (as Realtors are), you develop working relationships with different lenders, title and escrow companies, as well as with many other home service businesses. Your Realtor’s first order of business is to confirm your ability to complete a purchase for the home you select – and that is most easily done by obtaining a pre-qualification letter from a lender. Going to the people they know is the easiest way to do that. However, the pre-qual is not a promise of a loan – it’s just an observation that based on what you told them, you may be able to qualify for a mortgage of that amount. Definitely take your Realtor’s suggestion, but be sure to do some shopping on your own. You’re probably going to be surprised at what you discover.
Question #2: “What is the loan origination fee?” Since loan origination fees can be a substantial cost for obtaining your new home mortgage, this question should definitely be next on your list. Since the recent economic crisis, some of the things you might think you ‘know’ about mortgage loans no longer apply. One of those old myths is that obtaining a loan from a mortgage broker will cost you more in origination fees and costs. That’s no longer the case. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2014 has turned the tables on what you may have experienced previously. Now, those federal regulations cap the fees on mortgage brokers; now by law, they are considerably less than those fees that banks or mortgage bankers can charge. At Premier Mortgage, for example, we offer loans with no origination fee at all – 0%. (And no – we don’t make up for that with ‘junk fees’ either – just keep reading.)
Question #3: “What other fees or charges are there for my loan?” Often, it is the out-of-pocket costs that must be paid at close of escrow that can make or break your ability to even purchase the home you choose. Some of these charges are required and simply can’t be avoided – such as property taxes, insurance, and homeowners association fees. But fees beyond that should be considered closely. When you see items on your Good Faith Estimate such as Document Fees, Mortgage Processing Fees, Underwriting Fees, etc. – that’s the time to get out your pen and start crossing things off the list, because those are what fall under the category of the ‘junk fees’ referenced above – and many lenders (we’re one of them) don’t charge buyers those fees at all.
Question #4: “What’s my APR?” Annual Percentage Rate. That’s a huge question. Based on your mortgage loan interest rate, the APR is the total yearly cost of your mortgage, taking into account the fees on your loan such as interest, origination fee, insurance, points, and others charges included in your loan that were not paid at closing (such as taxes, etc.) Depending on what items you were charged for your loan, it can raise your stated “interest rate” considerably in real dollars. (Just remember, the higher the loan fees, the higher the APR.) So be sure to ask both questions – what is your interest rate, and what is your APR. Avoiding the fees mentioned in questions 2 and 3, above, can make a huge difference in what you pay overall during the life of your mortgage loan.
You wouldn’t let your neighbor take over your finances and decide how to spend your money, right? In fact, you probably wouldn’t even let your own parents do that. The decisions you make in selecting the right mortgage loan can have a tremendous impact on your future financial planning and affect your family for years to come. So our best advice is: Be wise. Ask questions. And know your rights.
For additional information or to schedule an appointment for mortgage prequalification or refinancing, call Premier Mortgage Lending at 702-485-6600 or visit premiermortgagelending.com.
Premier Mortgage Lending, NMLS #393282, is located at 701 N. Green Valley Pkwy., Suite 125, Henderson, 89074. The full-service lender is a member of the Las Vegas and Boulder City Chamber of Commerce, Better Business Bureau and Southern Nevada Home Builders Association, as well as an affiliate member of the Greater Las Vegas Association of Realtors.