Mortgage Questions to Ask When Shopping Around

Does the rate you're quoting me include any points?
You'll have to run the numbers yourself to see if it's worth it, but you should know if points are involved right at the beginning of this process.

Is there a prepayment penalty if, at any time, I decide to make a larger-than-usual payment?
There really shouldn't be. Don't get a mortgage that has one.

How long can I lock in my interest rate while waiting to close on my home purchase?
30 to 60 days is the norm.

How much does it cost to extend the lock-in period?
It depends: Some lenders charge a flat fee, others use a percentage of the loan. Either way, negotiate. Many lenders will extend for a few days for free. If you need more time, the fee should be a small fraction of a percentage of your loan, like .125% or a couple of hundred dollars.

Will you guarantee the Good Faith Estimate? If not, why not?
They should. If they don't, they better have a damn good reason. Actually, we can't think of any. They just should.

How long will it take to get approval?
It depends, but it can take as little as a week or as much as a month.

Do I have to have homeowner's insurance in order to get this loan?
Most lenders will require you to get homeowners insurance in order for them to grant you a loan. For their purposes, your insurance policy only has to be big enough to cover the cost of the mortgage (after all, they don't care about your home, they just want to protect their investment). You should get more coverage than that, though enough to rebuild your home if were destroyed. You can, and should, shop for homeowners insurance on your own. Check out this guide to learn more about it.

Do you charge an extra fee for your bi-weekly payment plan?
You should be able to pay your mortgage off more frequently, but you shouldn't pay for the privilege.

Here are the basics: Say you had a monthly mortgage payment of $1,000. If you make payments monthly, which is the normal schedule that lenders expect, you'll pay $12,000 in a year. But say you made a $500 payment every two weeks. Since there are 52 weeks in the year, that means you’d make that payment 26 times. 26 x $500 = $13,000. Basically, you're just tricking yourself into paying more per year. But that's good you'll pay off your mortgage faster by sending in that extra $1,000 each year.

Many lenders have automated-payment plans that will dip into your bank account and make a withdrawal every two weeks, and they'll charge you a one-time fee of, say, $350 to do it. Compared to what you're saving over the life the loan (tens of thousands of dollars in interest) by making these biweekly payments, $350 doesn't seem like a lot. But the better option is to do it yourself. Most loans today allow you to pay back more per month than the standard payment. Just double-check that your mortgage does, as there may be a few loans still out there with prepayment penalties that actually fine you for trying to pay off your mortgage faster. Any mortgage that has a prepayment penalty should be avoided.

Here's how to figure this out: Divide your monthly payment ($1,000) by 12 ($83.33) and add that amount back to your monthly payment (totaling $1,083.33). By the end of a year, you'll still have sent $13,000 to the bank, and you'll still have your $350.