Questions you should ask your mortgage broker…

Below are a list of questions you should ask your mortgage broker - just to make sure you understand the loan and also to make sure there are no junk fees!!

Remember…the first thing you need to think about is how long you’re going to live in your home (statistically most people spend between 5-7 years in their first home)

1. What is the PAR interest for my type of loan today? (PAR is the lowest interest rate available without paying any discount points and it should be the baseline for all your comparisons. Most mortgage brokers get hourly updates via their computers regarding the current PAR rate. You should know what the PAR rate is or if you should buy down the interest by paying points. 1 pt – 1% of the loan amount)

2. Will I be charged an origination fee? If so, how much? (Watch out for this. This is what most mortgage companies charge to “originate” your loan. And it’s pure profit for the mortgage lender. The traditional fee is 1% of your total loan amount. If it is more than 1% you need to know why.)

3. Will I be charged separate discount points? If so, how much?

4. Will you get a Yield Spread Premium payment for placing my loan? If so, how much is it? (this is nothing
but a kickback mortgage lenders get for selling you a higher interest loan than you qualify for. Watch out for this!)

5. If there is a YSP, ask: Can I receive full credit for the Yield Spread Premium to reduce my closing costs?

6. Do you get a Service Release Premium? If so, how much? (This is another hidden kickback. SRP’s are additional mortgage fees lenders can receive for giving another company the right to collect your mortgage payments. This fee can range from ½ point to 2 points, depending on the type of loan and the loan size. Most mortgage brokers keep this cash as additional profit)

7. Will I be charged a separate processing fee? If so, how much?

8. Will I be charged a separate document preparation fee? If so, how much?

9. Will I be charged a separate underwriting fee? If so, how much?

10. Will I be charged a separate tax service fee? If so, how much?

11. Will I be charged a separate flood certification fee? Is so, how much?

12. Will there be additional fees at closing?

13. What is the total of all these costs?

14. What is the interest rate and points of the loan?

15. What is the term of the loan: 5 years, 10 years, 15 years, 30 years?

16. If I apply for a loan this afternoon, can I hold you to these costs?

17. Is there a Lock Period with this loan? If so, for how long? (The lock period is the period of time that a quoted interest rate/discount point combination can be guaranteed. The shorter the lock rate the lower the interest rate ie. If you are quoted a 15 day lock, make sure you can close your loan in 15 days otherwise if the market rates go up you will be subject to a higher rate loan at closing)

18. What will my annual percentage rate be with this loan?

19. Instead of all these separate charges, can you offer just one simple fee, and promise to give me the PAR interest rate?

Remember you have the right to this information and any reputable mortgage broker will answer these questions without hesitation. Never feel that you are imposing on them and don’t let them confuse you. I have attached a spreadsheet so you can compare one loan program with another.