20 QUESTIONS TO ASK A LENDER OR MORTGAGE BROKER

20 QUESTIONS TO ASK A LENDER OR MORTGAGE BROKER
The process of obtaining a mortgage loan can be tedious and confusing. By asking the right questions, you can have a better understanding of the process and be certain that you are getting the product that best fits your needs and circumstances. Here are 20 questions that will help you get key answers about your loan, so you can make an informed decision:
1) Do you represent a mortgage broker, mortgage banker or lender, consumer finance company or a financial institution? It is important to know whom you are working with and their qualifications. A loan officer for a mortgage broker company assists you in finding a lender. A mortgage banker is a lender who directly makes real estate loans to consumers. A consumer finance company is a non-depository institution that may make high-risk loans with higher rates of interest than a traditional financial institution. A financial institution is a bank, credit union, savings and loan or savings bank that besides making mortgage loans also provides traditional banking services such as checking and savings accounts.
2) If working with a mortgage broker, ask: Are you licensed by the state? The California Department of Corporations, Department of Real Estate, Office of Real Estate Appraisers, and Department of Financial Institutions regulate most of the real estate services in California. Mortgage brokers doing business in California generally are required to be licensed by the Department of Corporations or the Department of Real Estate. If you are using the services of a mortgage broker, contact the Department of Corporations (DOC) at www.corp.ca.gov or 1-866-275- 2677 and/or the Department of Real Estate (DRE) at www.dre.ca.gov or (916) 227- 0770 to make sure the mortgage broker is properly licensed. Some companies may be licensed by both the DOC and DRE. Ask which license is being used to conduct your loan transaction. Also, California law requires advertising to contain a disclosure of the license under which your loan will be made or arranged. You may also wish to check with the Better Business Bureau at www.bbb.org to see if the company is a member and if any complaints have been filed against the company.
3) What is the interest rate you are offering to me and is it a fixed or variable rate? Is this the best possible rate based on my credit score? The interest rate determines the amount lenders charge you to use their money and is usually quoted as a percentage. The rate can be a fixed rate meaning that it remains the same throughout the loan. There are also variable or adjustable rate loans where the interest rate can change during the term. The rate can go up or down and your payment will adjust accordingly. A lower interest rate results in lower monthly payments or the ability to buy a higher priced home. Some loans offer an extremely low interest rate or payments. Payments on some of these loans may be too low to pay the monthly interest and will increase your loan balance, known as negative amortization or deferred interest, rather than decrease it. Payments on these loans can also increase substantially after several years. Ask your broker or lender if
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your loan contains these features, and, if so, ask for all of the details so you can decide if this type of loan is right for you.
Your credit score is your history of repaying debt and is the main source lenders use to determine the interest rates they offer you. To obtain the best possible interest rate, you should shop around. A high credit score should result in your being offered a low interest rate. The Department recommends that you obtain a copy of your credit report before applying for a loan. This will allow you to fix any errors and assist you in making sure you receive the best possible loan based on your credit history. Under federal law, you can obtain one free copy of your credit report from each of the three reporting agencies once in a 12-month period. For more information or to get your report, visit www.annualcreditreport.com or call them at 1-877-322-8228.
4) Are you locking my interest rate and, if so, for how long? A rate lock is when the lender or broker