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You’ll be surprised how many brokers and lenders fail to provide this information to borrowers, so if you want to reduce the complexity, complication and stress of applying for a home loan ask these ten simple questions every broker and banker should have answers for. If they don’t, run for it!
1. What is the interest rate?
Ask for the interest rate AND the comparison rate. Lenders and brokers are required to provide you with a comparison rate. It will tell you the actual cost of the loan when fees and charges are taken into account. However, be aware that not all fees and charges are accounted for.
2. What “bells and whistles” come with the loan?
Are there transaction accounts and credit cards available with this facility? Is there an offset account, a redraw facility and portability (which allows you to transfer the mortgage to another security)? Can you reduce your interest rate by sacrificing some of your options? There are hundreds of loan products available to you. Make sure you get what you want.
3. What are the borrowing costs?
Does the bank charge application fees, establishment fees, valuation and legal fees? Get an estimate up front. You also need to get an estimate of the government charges and taxes which will be applied to the loan. They can cost you thousands. Be wary of any loan provider that refuses to give you a good faith estimate up front.
4. Can I lock in the interest rate, will it cost me to do so?
If you want a fixed interest rate mortgage find out if there is a rate lock fee and how much it is. How long will it hold the rate.
5. Are there exit fees?
Many lenders offering fixed rates or lower interest rates also have early payout fees. They can be up to 3% of the total loan amount. Always ask if there is prepayment penalty.
6. What is the minimum deposit required for this loan?
Customers with good credit who are willing and able to pay lenders mortgage insurance (LMI) can get conventional loans with deposits that are much smaller than 20 percent. Many lenders will consider 100% but make sure you ask how much you will pay in lender’s mortgage insurance
7. What are the qualifying guidelines for this particular loan?
The qualifying guidelines can relate to your income, employment, assets, liabilities and credit history. For example, some lenders require up to six months of bank and credit card statements, others don’t. Picking the right lender can make your loan application less stressful and more manageable
8. What documents do I have to provide?
If you are applying for a full doc loan then you will need to provide proof of income and assets. A lo doc/no doc loan requires less paperwork, but generally a higher deposit.
9. How long will it take to process my application?
This varies from lender to lender. It often depends on how much business your particular lender is doing and how much business the market is seeing as a whole. When borrowers are knocking down doors all over town, credit assessment backs up, valuations take longer to obtain and other bottlenecks develop. Get a realistic estimate, this will determine when your settlement date should be and how long a rate lock you’ll need.
10. What’s in the fine print?
Not only should you take the time to read the fine print in its entirety, but you should also ask questions about anything and everything that you don’t fully understand. This is a common loan mistake because individuals are often so anxious to get the loan that they fail to pay attention to the details. Don’t assume that the terms on this loan are the same as for “any other loan.” Know what you are signing before you sign.