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Questionnaire
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CITY HOMEBUYER LEARNING CENTER |
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MESSAGE FROM BROKER/TOC
A. FIND YOUR LENDER
B. FIND YOUR REALTOR
C. FIND YOUR NEW HOME
D. NEGOTIATE YOUR PURCHASE
CONTRACT
E. GET ORGANIZED FOR YOUR
CLOSING
F. CLOSE YOUR DEAL
FIND YOUR LENDER
1.
Identify the Best Lender for Your Needs. Mortgage loans
are available through numerous sources including banks, credit unions,
mortgage brokers, and specialized national and regional mortgage
companies. If you have an existing banking relationship, you should
make an inquiry with them, as banks sometimes offer the best mortgage
terms to customers that maintain checking and savings accounts with
their institution. In addition, you should seek out referrals from
your friends and family to identify some loan officers that have
a good track record. Upon request, Harbor City can also provide
you with a list of lenders that we have found to be reputable.
2.
Get Pre-Qualified or Pre-Approved for a Mortgage Loan. A
buyer will always be in a better bargaining position with a seller
when armed with evidence of either pre-qualification or pre-approval
for a mortgage loan. Thus, once you select your preferred lender,
it is worth your time to fill out the lender’s paperwork to
obtain pre-qualification or pre-approval. The difference between
pre-qualification and pre-approval is outlined below:
- Pre-qualification.
Upon examination of your personal financial statement and credit
history, the loan officer will provide a non-binding estimate
of the loan amount that you are qualified to borrow. Pre-qualification
gives you a rough estimate of your borrowing power.
- Pre-approval. Upon
examination of your personal financial statement and credit history,
the loan officer will issue an approval letter for a specified
loan amount. These pre-approval letters typically expire after
30 to 60 days. Pre-approval may cause sellers to view you as a
more credible buyer. Pre-approval may also allow you to lock in
an interest rate for a specified period of time.
3.
Negotiate Your Loan Terms. The process of negotiating your
loan terms can be complicated. In part, this is due to the wide
variety of loan options that are now available on the market. The
discussion topics below are intended to summarize some key terminology
that you should be familiar with when negotiating your loan. If
you have engaged Harbor City as your buyer’s agent, your Harbor
City agent will be happy to assist you in reviewing the various
loan options that may be available.
- Points. A “point”
is a fee charged by the lender equal to one percent (1%) of the
total loan amount. A lender may have a program that includes a
fee equal to “two points” or two percent (2%) of the
total loan amount. “Points” are sometimes also referred
to as “loan discount” or “discount points”.
In exchange for this fee, a lender will typically agree to make
a loan for a lower interest rate. If you prefer a loan that does
not include “points”, you typically agree to pay a
higher interest rate. A lender may elect to market a loan program
with “points” because they can then advertise a lower
stated interest rate.
- Fixed Rate vs. Variable Rate.
Many lenders provide you with the option to choose between: (a)
a fixed rate loan; or (b) a loan that involves a variable rate
at some point in time, such as a “5-Year ARM” (interest
rate fixed for 5 years and then adjusts with market rates). A
fixed rate loan is most appropriate when you anticipate living
in a home for a very long period of time and you are not comfortable
accepting the risk of a general rise in interest rates. A variable
rate loan typically features a slightly lower interest rate, since
the borrower has agreed to assume some risk of fluctuations in
interest rates. A variable rate loan is more appropriate for a
buyer that desires the lowest possible interest rate and envisions
moving to a different residence within the first 5 or 10 years
of the home purchase.
- 30-Year Mortgage vs. 15-Year Mortgage.
Most lenders will give you the option to spread your principal
and interest payments over a period of 15 years or 30 years. In
the case of a 15-year loan term, the borrower is electing to make
larger monthly payments in return for getting the loan paid off
sooner.
- Private Mortgage Insurance (PMI).
Most lenders require a buyer to pay for the cost of PMI when the
buyer’s downpayment is less than 20% of the purchase price.
PMI should be distinguished from “title insurance”,
“mortgage life insurance” and “homeowner’s
insurance”. PMI is best described “high risk loan
default insurance”, as the insurance provider is insuring
the lender in the event you default on your loan payments. Loans
to buyers with less than 20% equity are considered riskier as
compared to loans made to homebuyers with more equity. If you
can afford to do so, you should try to avoid the cost of PMI by
making a downpayment of 20% or more of the purchase price.
- Closing Costs and Closing
Escrows. When interviewing prospective lenders,
you should ask them to identity the closing costs and escrows
associated with each loan program. For instance, almost all lenders
require you to pay for the cost of an appraisal. Other closing
cost items may be negotiable. For instance, the amount of “points”
and “loan processing fees” may be lower with one lender
compared to another. Some lenders may require that escrows for
taxes and insurance be established at closing, while other lenders
may waived this requirement.
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