11 questions to ask you mortgage adviser
Knowing where to start when talking to your mortgage adviser can be difficult, especially if you're a first-time buyer! Here's our reccomendation of 11 questions that you should definitely ask your mortgage adviser.
What is the interest rate?
The interest rate is the amount of money owed to the lender as a small charge for letting you borrow the money. The interest rate will vary based off of what type of loan you need and your credit score.
What is a credit score?
A FICO credit score is essentially your ability to pay back a loan. A higher FICO score means that you are better equipped to pay back a loan. Your FICO credit score is based off of your payment history, amount owed, length of credit history, uses for credit (e.g. student loans, car payments, credit cards), and new credit.
What is my monthly mortgage payment?
Your monthly mortgage payment includes a variety of different costs. These costs include paying back the actual loan, interest, insurance costs, and taxes. Your monthly mortgage should not exceed 30% of your monthly income.
Is the mortgage a fixed rate or an ARM?
Fixed rate mortgages stay constant for the life-span of the loan. Fixed rate mortgages typically last between 10 and 30 years. An adjustable rate mortgage (ARM) starts out with a fixed rate but eventually increases in set intervals. When dealing with ARM’s be cautious that you fully understand the terms of the mortgage. This includes when the payments will increase and how often.
How will mortgage points affect my loan?
Mortgage points are upfront payments to the lender in return for lowering the interest rate. For example, you may give the lender £2,000 for one mortgage point which equates to a 0.25% reduction on your APR. Although the initial cost is higher mortgage points can save you thousands of pounds in the future. Mortgage points will be a part of your closing costs with the lender.
Will I get penalised for paying off my mortgage early?
Whether it be you have been saving a lot or you got a raise at work you might find yourself in a position to pay off your mortgage early. It is important make sure there are no penalties if you decide to pay off your mortgage early. A simple question at the beginning that could save you a lot of stress in the future.
What is the minimum down payment?
This will vary from circumstances of the situation. The average down payment for a mortgage is around 20% of the principal.
What is an FHA mortgage, and do I qualify for one?
FHA stands for Federal Housing Administration. Loans that are insured by the FHA can have much lower down payments. FHA mortgages are very popular with first-time home buyers. Although the down payment is less FHA loans have higher insurance premiums.
What are the qualifications for this loan?
In order to qualify for a loan you will need to have a registered bank account and a steady stream of income. Often times the lender will require several months of loan payments in your bank reserves.
Do I have to pay mortgage insurance?
Mortgage insurance is required on loans that are classified as risky. Often times this is with first-time home buyers, so all FHA loans require mortgage insurance. Getting mortgage insurance may allow you to be eligible for loans that you otherwise might not qualify for. However, it is important to keep in mind that mortgage insurance protects the lender and not you.
Do you have other mortgage products with lower rates that I qualify for?
Before you start looking at other mortgage providers you should first check with your current lender to see other types of loans that they offer. Mortgage providers often have many different types of loans that may be better suited to your financial situation.