Things To Remember When Shopping For A Loan Part 2

You already learned about different ways to get a loan from like mortgage brokers, government lending programs and such in our Things To Remember When Shopping For A Loan- Part 1. You also learned about the two kinds of interest rates and settlement costs amongst others.
In this second part, you will learn more about comparison of costs, insurance taxes, lock-ins etc.

Comparison of Loan Costs

APR or Annual Percentage Rate plays and important part when you're deciding to get a home loan so before you actually close a deal, you need to compare costs that will be beneficial for you.

Lock-Ins

If you want to make sure that your rates or points will remain the same until settlement or "closing of the escrow process", ask your lender if a "locking-in" option is available for you. Make sure you also know if there is a lock-in fee or if the fee will lower down the amount "you have to pay for the points". When asking for a locking-in option. Try asking if it has an expiration and what happens if it does have and ask if you're going to get the fee back in case your application is denied.

Tax and Insurance Payments

When you apply for a loan, the mortgage payment you give monthly will be used to pay it together with the interest. A portion of your monthly payment may go directly to an escrow account or otherwise known as "reserve" or "impound account" to let your lender pay for things like "real estate taxes, property insurance, mortgage insurance and/or flood insurance". You need to ask your lender about these things so you know what you are getting into.


Transfer of Loan

When you are applying for a loan, you usually deal with a prospective lender first but afterwards there may be other companies coming into the picture to collect your payments and this is called "servicing". Whether your lender will transfer you to another company or not, he will let you know of this.

Mortgage Insurance

When your down payment is 20% less than the sales price, lenders will often require you pay mortgage insurance. There options you can choose from; you can either pay monthly, annually or with an initial lump sum or a combination of the three depending on what you have negotiated on or depending on the requirements of your lender.
Mortgage insurance is different from mortgage life, credit life or disability insurance  which are about disability or death.
There is also an insurance called "lender paid" wherein your lender will handle the payment to the insurance company and your lender will just add the costs to your interest rate; "LPMI may reduce settlement costs". Always be sure that you know and understand what the deals you are entering into because "you cannot cancel LPMI or government mortgage insurance during the life of your loan". There is an option to call off private mortgage insurance like when your loan balanced was decreased to a specific amount but again, before entering into any deal, you need to make sure first if there are any requirements for this transaction.

Flood Hazard Areas

If you're planning to apply for a loan to buy a house in a flood hazard area, you will be required to pay flood insurance. Other government programs will not even let you buy a home in a flood hazard. When you're already guaranteed a loan and your location suddenly becomes a flood hazard area, your lender may ask you to buy the insurance.