Learn Top 15 Mortgage Questions to Ask Your Lender

8. How does one obtain a fixed interest rate?

Because mortgage interest rates fluctuate from day to day, obtaining your rate is an important part of the mortgage process. Locking your interest rate assures a particular interest rate for a specific length of time, usually between 30 and 60 days.

You may usually lock in your interest rate as soon as your original loan is approved. Most buyers, however, wait until they have chosen a specific home to purchase and are formally under contract.

As previously stated, mortgage interest rates change, and there is no way to predict them precisely. You simply have no idea what the future holds. Nobody does. So instead of attempting to time the market, rely on your lender’s experience. Trust them when they suggest it’s a good time to lock in your rate. Some lenders demand a fee to lock your interest rate. Ask questions ahead of time so you know what to expect.

9. What exactly are mortgage points?

Mortgage points, also known as discount points, are a method of prepaying interest to obtain a cheaper interest rate on your mortgage. Each mortgage point is equal to 1% of the value of your home. That means that if you acquire a $250,000 loan with two discount points, you’ll pay $5,000. A point can typically cut your interest rate by one-eighth to one-quarter percent.

We don’t advocate discount points because it takes so long to recoup the expense. In most circumstances, you’ll sell your home or even pay it off before recouping the money you spent in points up front. Skip the points and concentrate on placing as much money down as possible.

10. What is included in your mortgage payment?

So, what happens when you make your monthly mortgage payment? It’s nice to assume that the entire amount merely goes toward principal reduction, but your monthly payment actually goes for a lot more. The following is a typical monthly mortgage payment:

• Principal

• Interest

• Homeowners insurance

• Property taxes

If you want to pay more on your mortgage, be sure to specify that any additional cash should be applied only to the principal, rather than an advance payment that prepays interest.

11. What exactly is an escrow account, and how does it function?

Additional expenditures, such as homeowner’s insurance and property taxes, may be included in your mortgage payment. These are annual expenses that come with homeownership, and if you don’t make them, the lender is at risk.

The monthly share of each of those accounts might be added to your mortgage payment by your lender. This money is held in an escrow account handled by a third party to ensure that the costs are paid on time.