Chapter 2

KNOW YOUR MORTGAGE

Know Your Down Payment and Private Mortgage Insurance

The largest upfront cost in purchasing a home is the down payment. Most traditional lenders expect borrowers to put at least 20% of a loan's total amount down.

 

Borrowers who are unable to do so are required to purchase Private Mortgage Insurance (PMI). This insurance protects the lender in case of default by the borrower.

If PMI is required, ask your lender what the total cost of the insurance will be, how much it will increase your monthly payment, and how long you will be required to carry the insurance.

Be sure to get a clear indication of the down payment percentage required by your lender. You will also want to know what kind of documentation your lender requires to verify that you have funds for the down payment.

Lender Interview Cheat Sheet

  1. What kind of loans do you offer?

  2. What kind of loan would you recommend for me? What are the advantages and disadvantages of    this loan structure?

  3. What is the current interest rate? Is the rate quoted the lowest for that day or week?

  4. What is the Annual Percentage Rate (APR) of an offered loan?

  5. Is the loan rate adjustable or fixed?

  6. What are the discount points and origination fees?

  7. What are all the costs of the offered mortgages?

  8. If the rate is adjustable - how will rate and loan payment vary?

  9. What are the qualifying guidelines for this loan?

  10. What is the lender’s required down payment for this loan?

  11. What documents will need to be provided?

  12. What are the closing costs?

  13. Will the lender guarantee the GFE (Good Faith Estimate) of settlement charges and loan terms?

  14. Does the lender offer a loan rate lock? Is there a fee for the rate lock?

  15. Is there a prepayment penalty?

  16. Are you equipped to approve loans in-house?

  17. How much time do you need to fund the loan?

  18. Will mortgage insurance be required?

  19. Can the term of the loan be extended?

  20. Is there a cap on payment adjustments?

Chapter 2 Page 7

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