Applying for a mortgage: 10 questions to ask

Getting ready to buy a home? Make sure you ask these 10 key questions when you submit your mortgage application
1. What is the interest rate on this mortgage?Ask for the lender's loan estimate, which breaks down the interest rate and fees. It will include the annual percentage rate, or APR, which accounts for the interest rate, points, fees and other charges you will pay for a mortgage.
2. How many discount and origination points will I pay?Lenders may charge discount points, origination points or both. One point is equal to 1% of the loan amount. For example, if you get a Kshs1,000,000 mortgage and pay 1 discount point, you'll pay a fee of Kshs 10,000. That's 1% of Kshs1,000,000 (Divide the loan amount by 100 to calculate 1%.)

• Discount points reduce the interest rate. They are prepaid interest and are tax-deductible.
• Origination points are fees charged by the lender to cover the costs of originating the loan.

3. What are the closing costs?Borrowers pay fees at closing for services provided by the lender and other parties, such as title companies. Lenders are required to provide a written estimate of these costs within 3 days of receiving a loan application.
4. When can I lock the interest rate, and what will it cost me to do so?Interest rates might fluctuate between the time you apply for a mortgage and closing. To prevent getting a higher rate, you can lock the rate, and even the points, for a specified period. Fees may apply, but not always. 

5. Is there a prepayment penalty on this loan?Some lenders charge a penalty if you prepay on the mortgage. Some apply only when you refinance or reduce the principal balance by more than a certain percentage. Find out the penalty specifics and see if your lender will lower the rate if you choose a loan with a penalty.
6. What is the minimum down payment required for this loan?A bigger down payment might mean a lower interest rate and better loan terms. With a down payment of less than 20%, you will probably have to get mortgage insurance, increasing your monthly payment.
7. What are the qualifying guidelines for this loan?Ask about requirements relating to your income, employment, assets, liabilities and credit history. Qualifications for first-time homebuyer programs, Veterans Affairs loans and other government-sponsored mortgages are typically less stringent.
8. What documents will I have to provide?Lenders require proof of income and assets, including bank statements, tax returns, W-2 statements and recent pay stubs. More may be needed to show your down payment and ability to pay closing costs.
9. How long will it take to process my loan application?Depending on how busy the lender is, it can take as little as 2 weeks or as long as 60 days. Be patient and forward any requested documents quickly to speed up the process.
10. What might delay approval of my loan?A job change, an increase or decrease in salary, a new debt, a change in your credit history or change in marital status could delay your loan approval. The best way to avoid that is to put your financial life in a holding pattern until you reach the closing table.

WHY YOU SHOULD INVEST IN PROPERTY IN KENYA

Kenya has been in the Global limelight as a favorable investment destination, especially after the GES summit that happened in Nairobi in July 2015. International media has picked this up as expected. A great take I liked was by Forbes , a nice article entitled 'Why invest in Africa’s Fastest growing economy'.

It is an open secret that the business environment in Kenya has been great, with many multinational companies setting up office in the recent history ; big names like Google, IBM, Microsoft, ORACLE, SAP, Coca Cola, GE just to mention a few.

I know you have seen the “for sale” sign on those apartments on your way to work, a number billboards about property open days as you sat in the notorious Nairobi traffic jam, or you just saw a whole newspaper page advert on a new real estate development in Nairobi. All these signs suggest something, the real estate sector is flourishing. It has experienced it’s share of good performance over the years, contributing to 7.85% and 8.12% of the GDP for the last two years respectively according to the Central Bank of Kenya economic review.

This growth in real estate in Kenya is mainly driven by a huge housing deficit being experienced in housing in Kenya. Currently, the Kenya urban population is growing at an average rate of 4.2% annually resulting in a demand of about 150,000 new housing units every year. The market is only supplying about 20,000 units per year, leaving a yawning deficit. In Nairobi alone, the housing deficit stands at 80,000 units annually according to the Planning and Housing Executive Committee .

These factors present a superb opportunity for those wishing to invest in property in Kenya. With rental returns having grown by 9.7% over the past year and property prices having increased 3.46 times over the last 15 years, the prospect of making a neat return on investment real estate in Kenya is almost given.

HOME BUYERS CAN NOW HEDGE AGAINST INFLATION

Property developers have unveiled a new way of buying houses, which seeks to protect buyers from unexpected price flactuations while improving on value of their investment.

The investors have particularly been advised to buy houses through off-plan purchase system, which helps cushion them from price escalations fuelled by inflation and exchange rate volatility, among other economic factors.

Under the off-plan buying system, homebuyers pay a certain percentage of the home price to a developer to reserve the property under construction.

This approach protects them from rising cost of building materials, which has forced developers to constantly adjust their prices making it expensive for potential homebuyers.

While Central Bank has adjusted upwards its benchmark lending rates to commercial banks to control inflation and protect a weak shilling, part of the consequences have been an upward revision in mortgage rates. The changes in these rates has forced leading banks to also review up their mortgage rates.