What you need to know when it comes to a home mortgage

A home mortgage is serious financial business. The financial information surrounding this loan -- how much you borrowed and how well you’ve paid -- will go on your credit history and it can seriously affect your financial future. Here are some questions you should ask your lender before you commit to a mortgage.

What is the base interest rate and APR? How will it change over the term of the loan? This depends on whether you get a fixed-rate home mortgage or adjustable-rate mortgage (ARM). A fixed-rate mortgage has a constant interest rate for the life of the loan, but an ARM has an interest rate that changes periodically according to general interest rates. If the mortgage you’re looking at has a variable interest rate, make sure you find out how often it will adjust and whether there is a ceiling on the rate.

Is this the best rate for which I qualify? Ask your mortgage lender if they are offering you their best rate for that month, day or week. Also make sure the rate they’ve offered you is, in fact, the best rate for which you qualify. Interest rates change frequently and you want to get the best quote possible.

Do I have to pay points to achieve this rate? You might have to pay points in order to lower the interest rate on a home mortgage, especially if you have any blemishes on your credit.

Will you lock in the interest rates and points you’ve quoted, and is there a charge to do so? Your mortgage lender should be able keep your interest rate and points steady for a certain time period so that you won’t have any surprises when you find the home you want, agree on a price with the seller, and are ready for the mortgage to go through.

What is the term of the mortgage? Make sure you know how long you have to repay your debt.

Will there be a lump sum (balloon) payment due at the end of the term? Find out what you will owe at the end of your home mortgage so that you can adequately prepare your finances.

What is the minimum down payment you require? For home mortgages, you will usually be required to pay private mortgage insurance if you make a down payment of less than 20 percent.

What will my monthly payment be? This information is essential in determining your monthly budget including utilities, insurance, food and other expenses.

Is there is a penalty for prepayment? In other words, if you pay off your mortgage early, will you be charged a fee?

What are the fees associated with the mortgage and what is their estimated total? You will probably be expected to pay some fees associated with processing your information and closing the mortgage. Ask your lender for a good faith estimate to get an idea of how much you will be expected to pay.

Under what circumstances can you demand full payment of the mortgage? If you are late or fail to make a payment, you may be expected to pay the entire amount before the term of the mortgage is over. It’s important to know this ahead of time.

What documentation is needed? You may need to submit information about your debts, assets and employment.

How long will the approval process take? This can impact whether a seller accepts your offer on a home.

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