If we have decided to buy a new house, it is time to call the mortgage company and apply for a new mortgage. However, we need to be sure that we will get the mortgage that’s suitable for our situation. In this case, we should be sure that we are dealing with the right lender. When choosing a mortgage lender, there are things we need to know. As an example, we should check whether the mortgage includes an application fee and if we don’t get the mortgage, will the fee be returned to us? Application fee isn’t a requirement in a mortgage process and some lenders don’t require them. However, any mortgage company would pre-qualify us before we take the application. In general, application fee isn’t required and we should be able to find mortgage companies that don’t charge this fee. So, if a company does require it, we should make sure that there’s a good reason for that. If application fee is required, we need to make sure that it includes the appraisal fee.
In general, the loan originator must be upfront about all details required during the mortgage application process. As an example, points can be rather meaningless if we have suitable interest rate and in some cases, we don’t have to pay off the mortgage in full. We should get zero point mortgage, if we want to pay off the mortgage in less than two years. Some mortgage providers apply prepayment penalties, so we should be sure that lender explain all about them. Some lenders charge us extra money if we decide to refinance with other mortgage. But, this charge will be waived if we refinance with them. This practice is generally known as “protecting their interest”. That’s the reason we need to immediately check for any possible penalties before we choose a lender. Make sure that we won’t be required to pay penalties if we need to refinance the house for specific reasons. In general, we shouldn’t agree to pay prepayment penalty for selling our house and if we are required, we should choose other lenders.
It should be noted that there’s a possibility that our interest rate will change and in some cases, the principal itself will increase. In general, we should choose lenders that allow us to choose fixed rate. Some lenders may encourage us to choose mortgage with variable interest rate, so we may pay less than the original payments, if the interest rates in the market go down. We should ask the lender whether it applies negative amortization to our mortgage, which causes the principal to increase. If that’s the case, we should avoid the lender immediately. When applying for variable rate mortgage, we should be sure that we know all the details. We should be aware that mortgage originators are essentially salespeople and they may deliberately hide some less appealing details if we don’t actively ask questions about them. They won’t mess with us if they know that we are quite knowledgeable about mortgage application process.