December 20, 2021
If you are getting your finances in order and making plans to apply for an FHA home loan, there are some important questions you can ask your lender ahead of time to make your path to homeownership a smoother one.
Some people, even when applying as new house hunters, have done enough research ahead of time to ask some of the right questions. But there are some home loan questions with answers that mean a lot more when combined with other information. What do we mean by this?
It does not matter if you are looking for an FHA condo loan, a new construction loan, mobile home mortgage, etc. You will definitely want to ask the lenders you compare about interest rates and how much your loan will cost.
The best advice when comparing lenders? Don’t stop with these questions–be sure to get information on rates AND closing cost estimates. Why? You want to compare how they look side by side in order to get the full picture of how the lender prices the loans.
That’s due to the fact that there are participating FHA lenders (and other lenders, too–not just for FHA loans) who prefer to keep interest rates the same in some cases while increasing closing costs if rates are increasing.
Other lenders may keep closing costs lower but hike the rate. You’ll want to know the facts and figures for both. What does the loan cost now and what will it cost if interest rates go up?
Another important area to pay close attention to? The difference between an interest rate and the Annual Percentage Rate or APR of the mortgage.
Don’t forget to ask your lender about the Annual Percentage Rate on the loan since APRs take into account the fees associated with the loan. The APR is more than just the going rate.
FHA home loans require mortgage insurance which is typically offered for either 11 years or the full lifetime of the mortgage depending on variables including the loan term and other factors.
You have a monthly premium to pay but also an Up Front Mortgage Insurance Premium due at closing time and you will want to know how much financing the premium may increase your monthly mortgage payments.
Some choose to finance the premium to save money upfront. But if your goal is lower mortgage payments, ask your lender to help you run the numbers.
If you can’t avoid financing the upfront premium you do have the option to negotiate with your seller to cover a percentage of your closing costs for the FHA mortgage. That may be a good tradeoff if you need to finance the premium.
FHA loans don’t favor first-time homebuyers (at least not according to the FHA Lender’s Handbook, HUD 4000.1) but your lender might. Ask about first-time buyer incentives, new customer incentives if you are comparing lenders, and other related perks.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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