If you’re buying your first home or you haven’t applied for a mortgage in a while, it can be helpful to prepare a list of questions to get answered from your lender. It’s important to listen to the answers, but it’s also important to observe how patient and clear your loan officer is while answering your questions. You want a good loan terms, of course, but you also want to make sure you choose a lender with whom you feel comfortable. Here are three important home loan questions to include on your list.
What is the interest rate—and how is that different from the annual percentage rate?
Your lender should be able to provide a straightforward answer to the mortgage rate question, but the annual percentage rate (APR) may need more explanation. The APR also factors in the points, fees and other charges you must pay to secure your mortgage. Ask your lender for APR specifics for your loan.
Is it better for me to choose a fixed rate or an adjustable rate mortgage?
There are clear advantages to fixed rate mortgages, because they allow you to plan for a consistent principle and interest payment. (Keep in mind that real estate taxes, homeowners insurance, and, if required, private mortgage insurance are also factored into your payment, and may change over time.) If you plan to stay in your home for a significant number of years, it may make good sense to choose a fixed rate mortgage.
Here’s another scenario: Maybe you know that you will only stay in your home for, say, five years. Your lender may offer an adjustable rate program with a rate that’s lower than the fixed rate offering for the first three years of the loan. Perhaps there aren’t points associated with the adjustable rate loan, or perhaps there are fewer points charged on it than the fixed rate loan. Even if the rate increases in years four and five on your loan (get clarity on how much it can increase each year), it very well may be better for you to choose the adjustable rate loan. Ask your lender to help you calculate this for your specific situation.
What is an escrow account, and why are they used?
When you are closing on your home loan, you may be asked to pay money into an escrow account to cover the initial costs of your real estate taxes and homeowner’s insurance. As you make subsequent mortgage payments, a portion of that payment would also go into the escrow account. Then, when your property taxes and insurance payments are due, they are automatically paid from your escrow funds. If your taxes and/or insurance increases, your lender would typically cover the shortfall and then notify you about how much your mortgage payment will rise to cover these increased costs. If there is a surplus in your escrow account, the lender will typically issue a refund to you and adjust your payment accordingly. Benefits of this escrow system include spreading your tax and insurance payments over 12 months and ensuring they are paid on time.
Mortgage Loans at SCCU
SCCU offers great mortgage rates, along with convenient application options. Decisions are made locally.
We offer conventional fixed rate mortgages
and adjustable rate mortgages
, as well as condo loans
and jumbo loan rates
for loans greater than $424,000. If you’re on the path to homeownership, contact us today
All Other Areas: 800-447-7228
Space Coast Credit Union