Buying a home is a massive investment. And, it’s pretty obvious to keep in mind a number of things to buy right. But, for most homebuyers, the only thing that actually matters is the monthly installment.
While qualifying for an affordable monthly income is an important factor, there are several other factors you must also consider in order to make a safe purchase. So, to stray away from any unpleasant surprises, it is recommended to have enough financial education and ask the following questions to your mortgage lender.
What Type Of Mortgage Should You Go For?
Selecting the right mortgage calculator is a complex process. And, from so many options to choose from, it is best to ask your lender about what is right for you. The mortgage product you should go for depends upon your need, the budget and the house you want to buy.
That beings aid, here are a few common types of mortgages you can go for-
Fixed-Rate Mortgage
A fixed-rate mortgage means a loan term where the interest rates remain the same throughout. This is a great option, especially if you are planning to live in a house for a longer period of time.
Adjustable-Rate Mortgage
If you go for an ARM, the interest rates will remain stable for the first five years. After five years, the rate will change depending upon the market conditions.
Interest-Only Mortgage
This mortgage requires you to pay only the loan interest for a certain period of time and then pay the actual outstanding amount in subsequent payments or lump sum amounts.
What Is The APR And Interest Rate?
Another important question you must ask is what is the interest rate. The interest rate can depend upon a number of things like your credit score, current market conditions and your credit history.
Moreover, while interest rates are the charge for borrowing the loan, APR includes additional costs like broker fees. It is vital to ask your lender about what your interest rate and APR are.
What About The Grace Period?
Did you know that in some cases, you can cancel your mortgage after signing on the dotted line, and you won’t be subjected to any penalties? This is called the grace period.
It is recommended to ask your lender whether you have a grace period or not. And, if you have one, you must ask questions like how long is the grace period, what are the qualifying conditions to cancel your mortgage, and is there any paperwork involved?
Is There An Early Mortgage Payment Penalty?
Generally, if you have the finances, you might think that paying off the mortgage before your loan term actually ends and going debt-free is a great idea. But, with some mortgages, you would have to pay the penalty if you want to close the mortgage before the loan term ends.
In most cases, a pre-payment penalty is usually part of the contract. The only exceptions are certain special mortgages available to certain groups of people, like military loans. Therefore, before you close on your mortgage and sign the paperwork, make sure to ask the lender about the pre-payment penalty. And, if it’s there, ask them how much it is.
In A Nutshell
Before you sign that dotted line, it is important to keep in mind several things other than the monthly installments. The point here is to be open and transparent with your lender and ask them about everything from interest rates to monthly payments and if the insurance is mandatory or not.
