Questions to Ask a Lender When Shopping For a Loan


Ask the right questions when shopping for the lowest-cost loan. You can avoid predatory loans by careful shopping. Ask these important questions:

  • What is my credit score? Can I have a copy of my credit report?
  • What is the best interest rate today? Do I qualify?
  • Is the loan's interest rate fixed or adjustable?
  • What is the term (length) of the loan?
  • What are the total loan fees?
  • What is the total monthly payment? Does this include property taxes and insurance? If not, how much will I need each month for taxes and insurance?
  • Is there an application fee? If so, what is it, and how much is refundable if I don't qualify?
  • Are there any prepayment penalties? If so, what are they and how long do they last?
  • Is this loan a recourse or non-recourse loan? (Recourse is a debt instrument with which the lender can take action against the borrower or endorser personally in addition to foreclosure on the property covering the lender's mortgage.)


If the loan is an adjustable-rate mortgage (ARM), ask:

  • What is the initial rate?
  • How long will that rate stay in effect?
  • How is the adjusted interest rate determined? (Generally, a specified amount - the "margin" - is added to a current published rate - the "index".).\
  • How often can the rate change?
  • How much can the rate go up each year and over the life of the loan? What is the maximum monthly payment you could be required to pay? Would you be able to afford it?
  • Does the loan set a minimum interest rate?
  • Do the monthly payments gradually decrease the amount you owe even if interest rates increase? (With some loans, the amount you still owe can increase rather than decrease each month - called "negative amortization".)
  • Does the interest rate increase if your payments are late?
  • Could you qualify for a loan with the maximum interest rate permitted under the mortgage? If not, do you anticipate earning more in the future so you will be able to afford the higher payment?
  • Can the adjustable rate mortgage loan be converted (changed) to a fixed rate without refinancing into a new loan? Is there a charge to convert?


Source: National Association of Realtors

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Roberta Williams-Lock

Principal Broker
PO Box 80883
Portland OR, 97280