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6 Questions to Ask Your Mortgage Lender Before Purchasing a Home in the Country

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Brenda Sammon
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Shopping for a home loan is just as important as shopping for the home itself.  From weeding through paperwork, to searching for loan terms, purchasing a home can be as mentally taxing as navigating a foreign country without knowing the language. 
 
Add the desire to live in the country into the mix and things get even stickier. For rural home mortgages, the loan and lender you select should be just as important as the location you explore or the home on which you put an offer.  That means the amount of legwork for each chore should be similar.
 
The Consumer Financial Protection Bureau (CFPB) last year established the “Know Before you owe:”  http://www.consumerfinance.gov/know-before-you-owe/ . This resource covers many of the questions and steps involved in one of the larger purchases you’ll make in your lifetime. Putting in the time and doing your homework could save you a significant amount of money. 
 
Once you’ve become familiar with the paperwork and application process, start interviewing lenders about their mortgage products.  Here are six questions to ask:
 
1. What is the required down payment? A variety of loan types are available and not all of them require the same down payment.  Make sure to ask how much you will be required to put down and, if it’s less than 20%, ask if taking on private mortgage insurance (PMI) will be an additional requisite.
 
2. Does this lender deal with the types of properties you are looking at? Not all lenders finance rural properties.  Are you looking at a manufactured home?  Is it a larger rural acreage?  Is it income producing?  Make sure to find out up front that they are equipped to deal with the type of properties you’re interested in.
 
3. Is it a fixed–rate or adjustable-rate mortgage? A fixed–rate mortgage keeps your interest rate and mortgage payment locked for the entire duration of the loan.  An adjustable rate mortgage (ARM) can change after a designated period, depending on the market, potentially increasing your monthly mortgage payment.
 
4. Are there any pre-payment penalties on the loan? In exchange for a lower interest rate or lower out-of-pocket costs up front, some lenders will charge a pre-payment penalty. Depending on the terms, the pre-payment penalty might have to be paid before refinancing or selling the home within a designated period.  It is important to know beforehand exactly what your loan requires.
 
5. What closing costs are associated with this loan? Closing costs typically fall between 2% and 5% of the total loan amount. A large enough range to make this question an important one. Understanding your commitment and planning for a way to earmark that amount will help with your stress level and make the process go more smoothly.
 
6. Are points included on the interest rate quoted? Points are upfront fees. Each point paid reduces the interest rate on the loan.  It’s important to clarify whether the quoted interest rate includes points and if so, how many.
 
It pays to shop around. 
According to a survey conducted by the CFPB, only 47% of consumers shop around for a home loan and for those who do, rates can vary by as much as a half percent from lender to lender. This can make a huge difference over the life of the loan. When obtaining a mortgage for your home in the country, you are the customer and you have the right to select the best lender for you. Being prepared, doing your homework and vetting prospective lenders will all help you feel as comfortable with your mortgage as you will in your new home.
 
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