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10 must ask questions for every loan officer.

1. Does your lender charge an application fee?

Application fees (or application deposits, holding fees, or any other creative name that can be thought up) are fees charged by lenders at the time of application. Typically these fees are credited towards your closing costs and/or prepaid items. The amount of these fees will vary from lender to lender and generally range from $0.00 up to as much as ½% of the amount requested.

Should you pay one? Not in the opinion of this Loan Officer! An application fee serves two purposes. First and foremost it guarantees that the bank/mortgage company will make some amount of money from you. The reason being, typically this application fee is NON-REFUNDABLE if you choose to close with a company other than that particular one.

Second, this fee serves as a deterrent from "shopping" around. If you stand to lose the deposit if you choose to go with another company why would you even look%u2026 odds are you would not. If your lender is charging you an application fee, or forcing you to put down a deposit you need to ask yourself, "does this person REALLY have my best interest at heart?"

2. Is there a prepayment penalty associated with any part of this loan?

What is a prepayment penalty? In short a prepayment penalty is a clause in your note that states if you sell your home, or even refinance, you owe the lender a fee for prepayment of the loan. This fee can vary in magnitude however typically it is based on a percentage of the loan amount.

Almost all nationwide lenders have programs and products that can be offered that do not have a prepayment associated with them. However, if your lending institution does not offer programs without a prepayment penalty it is important that you determine the specifics (how long it lasts, how much it is, can it be waived, if so for what fee, etc). In any case be sure you know the specifics.

3. What types of programs does your mortgage provider offer?

This is a good open ended question. A great way to test the knowledge, and ability level of your LO (Loan Officer). The answer to this question should be long, but not a filibuster, and should be in simple terms. A lot of vocab, and complicated verbiage should be seen as a red flag in this situation.

A short list of highlights should contain (but by no means be limited to)
-Conventional: both Fannie Mae and Freddie Mac
- Government loans: FHA, Rural Development, VA
- Fixed rates, Adjustable rates
- Regional loan programs: In New Hampshire, for example, New Hampshire Housing Finance Authority or NHHFA for short offers grant money to qualified home buyers.

4. Who would your Loan Officer recommend?

One good indicator of the level of service you will be provided by your loan officer is the quality of the referral network with whom he or she works. As a general rule smart ethical people tend to work with smart ethical people. When you sit down with your mortgage consultant ask he or she who they would recommend for a variety of services. This is not only a great way to get the inside track on the local area, but will also serve to provide you with references.

If your LO is your first point of contact in your home buyer process a Realtor is a great next step. Ask your LO with whom he or she works on a regular basis.

Where your mortgage will be closing is another great question. Accurate Title is an example of a title company with an outstanding track record. They are based in NH and handle closings for a variety of property types.

Other services you may wish to ask about include Mechanics, Doctors, Dentists, Lawyers, and the list goes on and on.

5. Will you be provided the HUD settlement statement prior to closing for your review?

The HUD Settlement statement outlines the terms, closings costs, prepaid items, and other fees associated with your mortgage. A thorough review of this document is an absolute must. This document should be provided to you far enough in advance for you to review at your own pace, and have any/all questions answered.

It is also important to note that not only is establishing that you will have access to this document prior to closing important, but also establishing how far in advance. Ask your Realtor how far in advance he or she typically receives the HUD from your LO. This will give you a certain level of confidence in the timeframe given.

A careful review of this document is a necessity especially for a first time home buyer. A good loan officer will give you this document in advance, but a great loan officer will take time to review it line by line before the closing. Make this a priority.

6. Is this company equipped to approve loans in house?

The ability to approve loans in house means a greater level of service. With an underwriter in the same building as the person originating the loan there can be better communication throughout the process and issues can be resolved prior to becoming problems.

7. Will your Loan Officer be present at the closing?

Your loan officer is your first and often only point of contact with your lender. Being at your closing to answer questions, or simply to be a familiar face is an important aspect of the process. It also adds a certain element of accountability and it is far less likely there will be errors or omissions.

8. What are the interest rate and the annual percentage rate?

The interest rate is the easier of the two. This will appear on most of the loan documents, and will be negotiated with your lender at a time prior to closing. If it is not, typically you will receive the 'market' rate the day your loan funds.

Annual Percentage Rate, or APR as it is commonly referred to, is derived from a complicated calculation which at its heart is the interest as well as all other applicable fees divided by the loan amount. It doesn't take into account extra payments or early payoff. It is also important to note that deriving an APR for an adjustable rate loan isn't possible.

9. Are you a servicing retained lender?

This is an often over looked, and under valued aspect when selecting a lender. Serving retained basically boils down to who you make your payment checks out to after closing. If a lender retains the servicing of a loan the checks are made out to your lender. National City is geed example of this type of lender.

The reason this is important to you as the borrower is simple: No change of address means less chance of lost payments, and less chance of incurring late fees as a result of mailing your check to the wrong location.

10. Are there any programs tailored to my specific situation?

First time home buyers, teachers, firefighters, veterans, and persons with disabilities, the list goes on and on. Whether you think you are in a special situation or not it's free to ask!

Zachary Saunders
Senior Mortgage Consultant
Construction Account Manager
Co-Chair GMNBR Community Service Committee
National City Mortgage, a Division of National City Bank
169 South River Road
Bedford, NH 03110
email: zachary.saunders@ncmc.com

National City Mortgage is a business unit of National City Corporation (NYSE: NCC), one of the largest banking companies in the U.S. In business since 1845, National City has $140 billion in assets and 32,000 employees, operates 1,400 bank branches in eight states, 250 mortgage offices in 37 states, serves over 3.5 million consumer households and thousands of businesses, and conducts other diverse financial services activities across the country.

What is a Buydown?

To put it simply a buy down is nothing more than paying your lender to lower your interest rate. This can be done to for a period of time called a temporary buy down, or for the life of your loan in which case it is called a permanent buy down.

To go a little further into detail:

An interest rate is an aspect of the mortgage you are applying for. It is 'worth' something to you, and it is 'worth' something to the financial institution that is lending you the money. Banks are in the business of making money, no real surprise there, and a large portion of the money that banks take in is based on the interest they receive from loans they have made. Therefore, it is in the best interest of a bank to write loans at a high interest rate.

Borrowers are in the business of saving money, again no real surprise there, and a large portion (at least in the beginning) of the payment you the borrower make each month is interest. Therefore, it is in the best interest of a borrower to get a loan at a low interest rate.

To this end you, the borrower, have the ability to pay a little upfront to lower your interest rate. For the ease of examples I will be referring only to permanent buy downs for the remainder of this article. However the concept holds true for both.

When you are debating a buy down you should ask the following questions:

The BIG THREE.

1) How long will I (we) stay in the house?

2) How many points will it cost me to lower my rate?

3) How much per month will that lower rate save me?

There they are, the BIG THREE. With just these three simple questions, and the answers as well you have all the tools you need to maximize your Bang-For-The-Buck.

As a general rule you want to start at a zero point rate and base a buy down from this reference point.

Let's look at the math

You have found the house of your dreams and you are sitting down with your Loan Officer to finalize paperwork, and lock your interest rate. The negotiated sales price for the house is $200,000. You have 10% to put down, and need to borrow $180,000.

Suppose your buy down will cost you ¼ point to lower your rate 1/8th %. And your monthly savings will be roughly $15 each month.

¼ point = .25% of $180,000

= .0025 * $180,000

= $450

So is this buy down worth the cost to you?

$450.00 / $15.00 = 30 months = 2.5 years

The total cost is $450.00 and the monthly savings are $15.00. Look back to question 1. How long will you be in the house? If the answer to this question is two and a half years or more than the buy down will save you money in the long term. This same line of thought works for larger buy downs as well.

One more example for good measure:

You find a Condo that you are in ready to buy. You negotiate the price to $250,000 and decide on an FHA backed mortgage for 97% of the sales price. You wish to know if a 3/8th % buy down will work in your favor. The cost of this buy down is 5/8th of a point, you will save $61.00 per month and you plan on staying in the condo for one and a half years, and with your 3% down payment you need to borrow $242,500.

Math time!

5/8 point = .625% of $242,500

=.00625 * $242,500

= $1,515.25

So is this buy down worth the cost to you?

$1,515.25 / $61.00 = 24.84 = 25 months = 2 years, one month

If you are planning to move in 18 months, this buy down will cost you more in upfront costs than the savings over your projected timeframe in the house. In this case the buy down would not be worth the investment if you are looking for a return on your investment.

Zachary Saunders
Senior Mortgage Consultant
Construction Account Manager
Co-Chair GMNBR Community Service Committee
National City Mortgage, a Division of National City Bank
169 South River Road
Bedford, NH 03110
email: zachary.saunders@ncmc.com

National City Mortgage is a business unit of National City Corporation (NYSE: NCC), one of the largest banking companies in the U.S. In business since 1845, National City has $140 billion in assets and 32,000 employees, operates 1,400 bank branches in eight states, 250 mortgage offices in 37 states, serves over 3.5 million consumer households and thousands of businesses, and conducts other diverse financial services activities across the country.

10 Things to have at your mortgage application.

A pre-qualification, or a pre-approval can only be as good as the information it is based on. Shop with the confidence of knowing you have as accurate a pre-approval as possible by bringing what you need the first time. Come to the application armed with the following items and leave with a pre-approval that is "worth more than the paper it is written on."

1) Your most recent two pay stubs.

Pay stubs are a critical part of the application process. The most obvious reason being so much of the approval process is based on your ability to repay the loan. Pay stubs are the backbone of this. By evaluating your pay stubs your lender can be sure the he or she is using accurate information and from this giving you and accurate pre-approval.

2) Your last two year's tax returns.

Tax returns essentially play backup to the pay stubs. They reaffirm your earnings, and help to avoid any problems down the road by sending up "red flags" early in the process. Examples of "red flags" can be as simple as showing a change in employment, or as severe as showing a gap in your employment.

By providing tax returns early in the process some other information can be determined such as capital gains, or losses, child support, alimony or unreimbursed business expenses. All of these factors must be considered when approving a borrower.

3) Your last two month's bank statements

This step in the approval process is the seemingly easiest, and yet somehow the trickiest! Asking for two month's worth of statements sounds so simple how can anyone mess this up, right?

Wrong!

Bank statements serve an important roll. They verify assets, show money for a down payment, they give your lender a chance to ask you questions about large deposits, or withdrawals, they help verify both the tax returns, and pay stubs by evidencing earnings. However, they can't do any of this if they are incomplete.

Bank statements seem to be the cause of a great amount of stress in the lives of some borrowers, but here's how to be sure yours are just what your lender needs. Do your bank statements:
- Have your name on them?
- Have your account number on them?
- Have all the pages?
This is a big stumbling block. If your statement says, 'pg 1 of 10' then you need to provide 10 pages to your lender. Even if they are blank.
- Have all the days requested
If your first statement has dates of March 1st to March 30th and the second has April 1st to April 30th your statement is not complete. (March has 31 days. I had to use the knuckle trick to remember, we all make mistakes! Haha)

4) Most recent two years of residency.

Your lender will need to know where you have lived the last two years. Be specific, and make sure you can supply this information for at least two full years.

5) Most recent two years employment.

Your lender will also need to be able to document where you have been working for the last few years. Again, be specific, and include all jobs worked for the last two years.

6) Information on any properties you currently own.

Include mortgages, tax information, insurance information and leases if they are rental properties. Some of this information will appear in your credit report, however having this early in the process can avoid last minute running around, and a potentially delayed closing.

7) A check for the appraisal.

As referenced in '10 things to ask every mortgage officer.' I am a firm believer that no money should go to your lender until the time of closing. The thought behind this is there seems to be a lack of motivation if your lender knows he is she has already been paid. The one exception to this rule is the appraisal check. This is a "third party fee" meaning it is not paid to the lender, it is paid through the lender to a third party, in this case the appraiser. Fees for appraisals vary from region to region and depend greatly on the property type (multi families are more expensive than a single family home)

8) A valid form of identification.

Welcome to post 9/11 America. When you come to the loan application be sure to have a form of ID or two. Some lenders will require them, some will not (at this point) but either way be certain to have at least one and be prepared to supply it as requested.

9) A pad of paper.

Bring a small notebook. If you've forgotten anything you can write down exactly what it is you missed. This will help avoid confusion and delays later down the road. A notebook also allows you to take notes on answers given to your questions. This allows you to look back and review answers, formulate questions, or get further examples.

10) Questions.

Ask questions. Your lender is your employee. You pay him (or her), and he (or she) works for you. '10 things to ask every mortgage officer.' has a short list of questions to start this process. Try not to be too specific at this stage, but ask questions.

If you're curious about one program versus another ask!

If you are curious about using a buydown to lower your monthly payment ask! (see Interest rate buy downs).

The point is knowledge is power, and you want to know your lender is working hard for you. Your lender should love questions, and answer them simply but thoroughly, if he (or she) doesn't ask the question again. Remember your comfort level with the both the lender and the transaction as a whole should be, and must be a top priority.

Zachary Saunders
Senior Mortgage Consultant
Construction Account Manager
Co-Chair GMNBR Community Service Committee
National City Mortgage, a Division of National City Bank
169 South River Road
Bedford, NH 03110
email: zachary.saunders@ncmc.com

National City Mortgage is a business unit of National City Corporation (NYSE: NCC), one of the largest banking companies in the U.S. In business since 1845, National City has $140 billion in assets and 32,000 employees, operates 1,400 bank branches in eight states, 250 mortgage offices in 37 states, serves over 3.5 million consumer households and thousands of businesses, and conducts other diverse financial services activities across the country.

Here's my first name; I am looking for a lender. Now quote me a rate!

I receive similar introductions on the phone more often than you would think, and more often than I care to recall. Rate Shopping is one of the most common practices and one of the most dangerous endeavors for homebuyers in the Mortgage banking industry. Don't get wrangled into the hype, as with everything there is a time, place and manor by which this exercise can be useful if you know what you're doing.

Why do people shop rates so ferociously?

This is a question that doesn't really have one right answer. And if you ask 100 people you will probably receive 100 different answers, explanations, and justification as to why each of the 100 answers is the right one. So here is answer number 101.

Rates are easy to understand.

Or so they seem on the surface. Mortgages, and finances in general, are loaded with complicated terminology, equations, and numbers. The reality is some (or even most) borrowers derive a sense of comfort from the feeling that an interest rate is one number they "know" the origin of, and can feel comfortable with. 6% is less than 7%. A 6% interest rate is lower than a 7% rate, the smaller the number the lower the rate.

So, in following this line of thought it would seem obvious that a lender who offers a 6% rate is better than a lender with a 7% rate.

Right?

Well, sometimes.

Take a look at it this way. You could call an eye doctor and say "My vision needs improvement, prescribe me glasses that will help me see." And s/he could throw out a prescription number. However, this would be ill-advised because the process of being fitted with corrective eyewear is a bit more complicated than that. Your optometrist requires a consultation and information about you because s/he needs to determine the make up of your situation in order to ensure the prescription number corresponds to the appropriate lens for your specific situation. As with a prescription, there is more to a rate than a number.

What's in a rate?

Interest rates are based on dozens of variables which include (but are not limited to):
- Your FICO Score
- Your Program/Product Type
- Your DTI
- Your LTV
- Your Property Type
- Your Occupancy Status
- Waiving Escrows
- Loan Term
- Loan Points

Each of these factors affects the rate you receive. Some affect more change than others and some help while other hinder. And it is not possible to accurately quote a rate without at least most of this information.

Another factor is time. In a steady market the rates are posted each morning. With each posting the rates can, and for the most part do change. As the market becomes more unstable this can become twice a day, three times a day, and in extreme situation even more often than that. This consistently changing platform is yet another reason why rate shopping can lead to so many problems.

For example, if you're shopping rates and you haven't yet found a property: Let's assume you take ten days to find a house (which is fast by the way). Assuming you "shopped" the rates and picked a lender based from this "shopping" your rates can, and will more than likely will have changed 10, 15, maybe twenty times! (or more!) And unless you are supplying all the information needed to derive the rate for your specific situation every time you are just getting a number and, A number does not a rate make! So how much was all that shopping really worth?

Zachary Saunders
Senior Mortgage Consultant
Construction Account Manager
Co-Chair GMNBR Community Service Committee
National City Mortgage, a Division of National City Bank
169 South River Road
Bedford, NH 03110
email: zachary.saunders@ncmc.com

National City Mortgage is a business unit of National City Corporation (NYSE: NCC), one of the largest banking companies in the U.S. In business since 1845, National City has $140 billion in assets and 32,000 employees, operates 1,400 bank branches in eight states, 250 mortgage offices in 37 states, serves over 3.5 million consumer households and thousands of businesses, and conducts other diverse financial services activities across the country.

You can find great local Manchester, New Hampshire real estate information on Localism.com Zachary Saunders is a proud member of the ActiveRain Real Estate Network, a free online community to help real estate professionals grow their business.