Don’t work with just any mortgage broker. Even if you have bad credit
and have to search harder for lenders willing to work with you, take the time
to interview several candidates to choose a reputable company.
Here are 10 Questions to ask your Mortgage Broker
#1. Which loan is right for me?
Whether you have good or bad credit, it’s important that any broker you
choose offers mortgage loan options that are right for your situation. Brokers
generally have access to loan products from a variety of lenders. It’s
important to compare lenders to get the best deal. Whether you want to find bad credit
refinancing or purchase a home, it’s important to have a
broker who will work on your behalf. If you get the sense that a mortgage
broker or lender is trying to steer you into a cookie cutter loan or doesn’t
really understand the business, run, don’t walk, away.
#2. What is the real interest rate on the loan?
Ask for the annual percentage rate (APR), which includes the
interest rate and other fees, such as closing costs, points, and the margin.
Home loans for people with bad credit will have higher interest rates so make
sure you are being given accurate quotes based upon your credit score. If you
are being offered an adjustable-rate mortgage (ARM), find out what the rate cap
is, which index is used to figure out the interest rate, and how often rates
can be adjusted.
#3. What are the costs for getting a loan?
Closing costs may include fees for an appraisal, title search, survey,
document preparation, recording fees, and taxes. Bad credit refinance loans
will also require you to pay closing costs.
#4. What are points and origination fees?
Each point is worth 1% of the total loan amount. If you have bad credit,
paying points can lower the interest rate on a mortgage refinancing or purchase
you otherwise couldn’t afford. An origination fee is money you would pay to set
up your new loan when refinancing. Origination fees can range from 1% to around
5%. Ask your broker if he or she can eliminate or reduce this fee.
#5. How do you get paid?
Any mortgage broker you work with should be able to explain upfront how
they get paid. Mortgage brokers don’t actually make loans, but instead work
with you to find the right lender. If you have bad credit, it’s important to
find a broker who can match you with mortgage lenders who work with such
clients. Mortgage brokers receive commissions and may be paid by customers and
lenders. The yield spread premium is a commission that your broker might
receive from a lender to mark up the interest rate of your loan.
#6. Will you provide an estimate of closing costs?
You should receive a Good Faith Estimate (GFE) of closing costs three
business days after applying for a loan. However, if lenders know that they
have to compete for your business, they may be more will to supply this
information before you actually apply.
#7. How long will it take to process a loan?
It could take 45 to 60 days, and even longer. Your mortgage broker should
include a closing date when writing a contract for a mortgage loan. He or she
should be able to explain the loan process, potential problems that can occur,
and a timetable for when the money will actually be available.
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