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Garden scene.These 10 key questions are equally applicable if you are pursuing a mortgage search yourself or using a mortgage broker. The answers will help you find the best overall mortgage for your needs.

1. What is the mortgage interest rate?

To determine exactly what you'll pay over the term of the loan, you need to know the rate. Rates change quickly, and if your credit is less than perfect, you may not be offered the lender's lowest figure.

3. What are my closing costs?

Mortgages come with fees for various services provided by lenders and other parties involved in the transaction. You want to know what those fees will be as early as possible.

4. When can I lock in the interest rate and what will it cost me to do so?

Your interest rate may fluctuate between the time you apply and closing. To prevent it from going up, you may want to lock in the rate for a specified period.

5. Is there a mortgage pre-payment penalty?

There may be a pre-payment penalty on your loan. Some penalties are 1 percent of the loan amount, others are equal to three or six months' interest, some apply only when you refinance or reduce the principal balance by more than 20 percent, and some kick in if you sell your home.

Find out the duration of any penalty period and how the penalty is calculated. Some lenders offer lower interest rates to buyers who accept prepayment penalties.

This is an important point, overlooked by most people. The reality is that you do not know what your financial situation will be in a year, or three years from now. If you want to pre-pay later on and have not understood or negotiated this point it could hurt you.

And, just because the penalty is listed on the official lender’s contract, does not mean it’s not negotiable. (Brokers deal with these issues all the time.)

6. What is the minimum down payment required?

The rate and terms of your loan will be based on a down payment figure, typically 5 to 20 percent of the purchase price. If you can put more money down, you may be able to lower your rate and improve your terms; if you come up short, you may be required to purchase mortgage insurance.

7. What are the mortgage qualifying guidelines?

These requirements relate to your income, employment, assets, liabilities and credit history.

8. What documents will I have to provide?

Most lenders will require proof of income and assets before approving your loan, and depending on the situation, may require other documents as well, such as business tax return statements.

9. How long will it take to process my mortgage application?

The answer will depend on a number of variables. When the loan business is brisk, underwriters get backed up, verification takes longer, appraisals move slower and other bottlenecks develop along the loan pipeline. Generally up to two weeks depending on whether or not all the information the lender requires is readily available. (This is where the pre-qualification / pre-approval process can be a real advantage.)

10. What might delay mortgage loan approval?

If you provide the lender with complete, accurate information, the loan process should run smoothly. If the underwriter discovers credit problems, however, there could be delays. Make sure you notify your lender if you change jobs, increase or decrease your salary, incur additional debt or change marital status between the time you submit an application and the time the loan is funded.

Put these 10 questions to your leading candidates and compare their answers. The results should lead you toward the mortgage lender that is right for you.

In addition to dealing with the same reputable, established Canadian financial institutions you're used to, brokers have access to some innovative ‘broker-only’ lenders who offer even more attractive rates and features. As a result, I can very often do much better than the rates offered by the retail banks.
Dara Fahy, North Vancouver, B.C.

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