There are five questions to ask a mortgage broker before you take the plunge and settle on his loan offer. If you don't ask these questions, you are showing your ignorance of the mortgage loan process and could be setting yourself up for problems with your loan down the line.
- Are there any points included in your quote and what is the origination fee? A mortgage broker may add points (1% of your loan principal that you have to pay up front at closing) to your loan package as a way to quote you a very low interest rate, so be sure to ask mortgage broker if there are any points attached to his offer. Also, the mortgage broker will likely charge an origination fee at closing–this is his profit in the deal. Find out how much.
- Is the interest rate you're quoting fixed or variable and what about the APR? Make sure you ask mortgage broker if the interest rate he's quoting is fixed and not variable. A variable rate is really only appropriate for a real estate investor who plans to "flip" the house very quickly for a profit. Find out the APR in addition to the quoted interest rate–the APR is interest plus other finance charges from the lender and broker.
- How long have you guys been in business and are you licensed? Don't assume that the broker is well-established–some are start-ups. Ask your mortgage broker how long his company has been in business, ask for references, and check the Better Business Bureau.
- Is my rate locked and if so, for how long? When a mortgage broker quotes you an interest rate, you need to find out if you'll still have that interest rate tomorrow and for as long as it takes to close your loan. The mortgage broker should be able to lock in the rate for you for a certain period of time.
- How long until I can close? Find out how soon the mortgage broker can get you to closing. An experienced and efficient broker should be able to finish your final paperwork and get your loan funds released within a couple of months.
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