Finding a trustworthy and knowledgeable lender and choosing the right loan for your purchase are as important as the neighborhood and home you put an offer on. When selecting a lender, be sure to ask the right questions.

Here are five questions to ask:

Are points included in the quoted interest rate? Points are upfront fees – equal to 1% of the loan amount for each point – paid to reduce the interest rate on the loan. Be sure to clarify whether the quoted interest rate includes points and, if so, how many.

What are the closing costs? Closing costs are typically between 2% and 5% of the total loan amount. In addition to lender closing costs there are title company fees and a  a $295 transaction fee to Reinhart Realtors. Closing Costs do NOT include Realtor Commissions. This is paid by the seller at closing. 

Is it a fixed-rate or adjustable-rate mortgage? A fixed-rate mortgage keeps your interest rate and mortgage payment locked for the entire duration of the loan. An adjustable-rate mortgage (ARM) can adjust after a designated period depending on the market, potentially increasing your monthly mortgage payment substantially.

Can the interest rate be locked down? The interest rate offered by a potential lender isn’t a guarantee — unless the lender can lock it for you. If you are offered a particularly low rate, make sure you know when you need to lock it and how long it can be held.

Are there prepayment penalties? In exchange for a lower interest rate or lower out-of-pocket costs upfront, some lenders will charge a prepayment penalty. Depending on the terms, the prepayment penalty might have to be paid before refinancing or selling the home within a designated period. It’s important to know beforehand exactly what your loan requires. If you don’t already have a lender, contact me. I would be happy to provide you with recommendations for knowledgable, local lenders who will help guide you through the mortgage process.