OTHER QUESTIONS & CONSIDERATIONS ABOUT LOAN
Can any of these fees or costs be waived?
Is there a prepayment penalty?
If YES, how much is it?
How long does it last (3 yrs, 5 yrs)?
Are extra principal payments allowed?
Is it a Balloon Loan?
If YES, how much is the payment
When is it due?
Lock-Ins (Rate Locks)
Is there a lock-in agreement in writing?
Is there a fee to lock the rate?
When does the lock-in occur? - at application , approval or
How long does it last?
When the rate drops before closing, can you lock-in at a lower
Variable or Adjustable Rate Loans
What is the initial rate?
What is the maximum the rate could be next year?
What are the rate and payment caps each year and over the
life of the loan?
What is the frequency of the rate change and any changes to
What is the index the lender will use?
What margin will the lender add to the index?
Credit Life/Disability Insurance
Does the monthly amount quoted to you include a charge for
If so, does the lender require it as a condition of the loan
How much does it cost?
How much lower would your monthly payment be without the
If the lender does not require it and you still want it, what rates
can you get from other insurance companies?
Is there an arbitration clause?
If YES, is there a cost to you?
Annual Percentage Rate (APR):
Cost of the credit, which includes the interest and all
A determination of the value of a home by a third party who is hired by the
other finance changes. If APR is more than .75 to 1 percentage point higher than the
lender to assure the home has enough value to pay off the loan should the borrower
interest rate you were quoted, there are significant fees being added to the loan.
default. It is typically paid for by the borrower.
Points: Fees paid to the lender to obtain the loan. One point is equal to 1% of the loan
Loan Origination Fees: Fees paid to the lender or broker for handling the paperwork in
amount. Points should be paid at the time of the loan.
arranging the loan. These are prepaid finance charges paid at the loan closing and are
Prepayment Penalty: Fees required to be paid by you if the loan is paid off early. Try
included in your APR calculation.
to avoid any prepayment penalty that lasts more than 3 years or is for more than 1-2%
Escrow: The holding of money or documents by a neutral third party prior to closing. It
of the loan amount. Certain high rate/high cost loans may not have prepayment
can also be an account held by the lender (or servicer) into which a homeowner pays
penalties under state and federal laws.
money for taxes and insurance.
Balloon Payment: Large payment due at the end of a loan. This happens when a
Interest Rate: The cost of borrowing money expressed as a percentage rate.
borrower has a low monthly payment covering only interest and a small portion of the
Lock-In: A written agreement guaranteeing a home buyer a specific interest rate on a
principal, leaving almost the whole loan amount due in one payment at the end. If you
home loan provided that the loan is closed within a certain period of time, such as 60 or
cannot make this payment, you could lose your home.
90 days. Often the agreement also specifies the number of points to be paid at closing.
Yield Spread Premium (YSP): Payment to the broker for selling a higher interest rate
Private Mortgage Insurance (PMI): Insurance that protects the lender against a loss if
loan than would otherwise be charged for that borrower. It must be disclosed to the
a borrower defaults on the loan. It is usually required for loans in which the down
borrower at the time of the loan and is generally acceptable if there are no other broker
payment is less than 20 percent of the sales price or, in a refinancing, when the amount
fees and this is how the broker is getting paid for his or her services.
financed is greater than 80 percent of the appraised value.