7 Questions To Ask Your Lender

In a recent newsletter from my Boulder Accountant, CPA, Mark Carson, CPA, JD, of Mark Carson & Associates, there was a reprint of a Denver Business Journal article by C. Stephen Guyer.

The article spent time talking about Regulation Z, The Federal Reserve Board, and the Truth in Lending Act.

The gist of the matter is that they want you to know what you’re getting into when you get a loan, and one way to do that is to have a handy set of questions you can ask any mortgage broker or loan officer early in the process of getting approved for a new loan.

Here’s a summary of some of the content from Guyer’s list of 7 questions:

Call, text, or email me today! …especially if you’re ready to talk about selling your home, buying a new home, or know someone that is moving!

1. Will my monthly payments reduce my loan balance? If you have an ‘interest only’ loan, your minimum payment may cover only the interest charged and that payment won’t reduce the original amount you borrowed.

2. Will I have to document my employment, income and assets to get this loan? It’s rare that these ‘low-doc’ or ‘no-doc’ loans are done much anymore, but you need to be aware that the numbers still need to work within your personal budget. Don’t get into a loan you can’t afford.

3. Will I owe a balloon payment? In the past, a loan with a large payment at the end of the loan cycle or term created a situation where you might secure a lower monthly payment during the course of the loan term. Since this type of loan relies on an ever-increasing home value, one would re-finance at the end of the term. This rarely works in today’s market.

4. Could I owe a prepayment penalty? Lenders make money by collecting interest payments. They want to keep your loan for several years, and one way to offset their ‘loss’ if you sell the property or refinance the loan is to charge a pre-payment penalty. If you’re wise, you’ll negotiate a loan with no pre-payment penalty.

5. Even if I make my monthly payments, can my loan balance increase? Sure, some loans have an option which let’s you pay less than the interest owed each month. That unpaid interest is added to the loan balance.

6. Can my monthly payment increase? Yep. Some lenders offered loans with ‘introductory’ rates, and there are also ARM’s (adjustable rate mortgages) which have a potentially escalating interest rate. Consider carefully before agreeing to borrow money under these kinds of terms.

7. Can my interest rate increase? Possibly. See “ARM’s” above. The recently proposed changes to Regulation Z require a more carful explanation of the possible consequences of ARM’s. While ARMs may be okay in a fairly stable financial market, we’re not so sure in these more turbulent financial times.

Call, Text, or Email me. I’m never too busy for your referrals.  As a real estate professional intent on giving back to the community, my relationship-based approach is exactly what you’ve been looking for in a helpful Realtor, and I will listen to you.

Thinking about buying a new home? How about  a very hip and energy-efficient remodeled home for sale in the Country Club Park subdivision of Boulder, or a downtown Louisville lot for sale?

You may also find  my neighborhood profiles, and  Boulder business profiles informative and useful. They’re both great ways to learn more about what’s going on in Boulder. Call, Text, or Email me today!

-Zachary Epps, GRI, ABR, REALTOR®, full-time RE/MAX professional,  and author of the Boulder Area Neighborhood Guide.

Your imagination is your preview of life’s coming attractions.
– Albert Einstein

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