When it comes to mortgage lending, checking and comparing the different lenders is the most difficult task. There are a number of charges applicable though, for every step of the procedure involved. Mortgage packages include the opening and closing costs, the quoted rates and the interest applicable. It is necessary to investigate the Mortgage Insurance, credit and cash reserve, lock-in period and the floating interest, before making a final decision. Thorough research is very important because a small difference in the mortgage rate can make a huge difference to the monthly payment.
Listed below are some essential requirements of the procedure that should be looked into, before closing a mortgage deal:
– The current mortgage rates.
– The documents required for the approval.
– The opening and closing costs applicable.
– The initial application fees.
– The lock-in period.
– Rate of floating or fixed interest.
– The mortgage insurance.
– Total lender fees payable.
– Monthly payment.
There are two kinds of mortgages offered by the mortgage lenders. One is the Fixed Rate Mortgage and the other is the Adjustable Rate Mortgage. In Fixed Rate Mortgage, interest rates are fixed over a period of time. An ARM or Adjustable Rate Mortgage is a unique loan product, where periodic changes affect the interest rate. In this product, the interest rate, as well as the monthly payments, fluctuate over the period of loan.
The application fees are primarily charged to process the loan. You are required to pay this charge at the time of applying for the loan. Some lenders include the application fee in the closing costs. Usually lenders do not refund the application fee, if the loan is not approved or you suddenly opt out of the deal.
Lenders need to estimate the market value of the property, before approving the loan. You are expected to pay an appraisal fee to the lender, to take care of the costs involved in getting the property appraised. The appraisal helps the lender to decide on the amount of mortgage that could be approved. Factors like location, use, condition, income from the property, replacement value and current cash value affect the appraisal.
You should try to avail of at least three Good Faith Estimates from the mortgage lenders. They are only estimates and the actual amounts vary. Some lenders charge Loan Origination Fees that cover the costs involved in evaluation, preparation and submission of the proposed mortgage loan documents. One percent origination fee is equivalent to 1% of the loan amount.
Closing Costs include the amount paid to the state or local government and the cost of getting the mortgage. The amount paid to the local or state authorities includes, property taxes, transfer fees and recording or documentation charges.
The total cost of getting the mortgage includes the expenses borne for conducting the surveys, credit checks, title checks, loan origination, documentation and processing fees and insurance.
The Recording & Transfer Charges are the fees paid by the borrower to the government, for recording the transaction and transferring the property title. Last, but not the least, you should make queries about the terms and conditions. A mortgage could possibly be the most important and largest debt you would ever be paying back.