My Loans Consolidated

With the 30-year mortgage rates sliding back to 5.04% last week, it is hoped that the number of mortgage application will once again increase despite the last week’s fall of application volume by 8.6%.

The Federal Reserve recently proposed to amend the Truth in Lending Acts and one of the interesting proposal is the one proposing to expand the disclosures required at mortgage application. It is expected that the mortgage borrowers will be able to shop for more information first before committing themselves with a loan.

The new disclosure policy is called the “Key Questions to Ask About Your Mortgage“, which shows the 7 questions mortgage borrowers should ask their potential lender. The questions that the Federal Reserve proposes for the mortgage borrowers to ask are as following:

1. Can my interest rate increase?
2. Can my monthly rate increase?
3. Will my monthly payments reduce my loan balance?
4. Even if my make my monthly payments, will my loan balance increase?
5. Could I owe a prepayment penalty?
6. Will I owe a balloon payment?
7. Will I have to document my employment, income and assets to get this loan?

It looks as if these questions could actually help mortgage borrowers to make the right decision but according to a report by the ‘Mortgage Professor’ at Daily Herald, the problem with these questions is that they only apply to mortgage types and options as opposed to the lenders’ operating policies. Consequently, if borrowers ask these questions to several different mortgage lenders, the answers from those different companies will be the same.

The more important facts for borrowers to know is actually the operating policies that borrowers currently have no way of knowing. These questions should disclose some important policies such as whether there will be any overage charges, locking fees and what is required to lock on an interest rate. The article proposes a completely different set of 7 questions to ask which will actually help borrowers to chose the best mortgage lender for themselves based on the policies that they operate on.

The questions proposed by the FHA for mortgage shoppers to ask their lenders seems to be a little too condescending. It is merely assuming that nobody actually knows about mortgage types or options. What mortgage shoppers should do before even going shopping and comparing is to understand the mortgage types and options first. This way it will help them understand what choices they have to choose from. After that, a deeper research in each of the lenders’ operational policies should be done by every mortgage shopper. The 7 questions to ask lenders after you understand the available mortgage types and options are the ones proposed by the ‘Mortgage Professor’. Read his full article here.

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