When you are ready to buy a house, several big decisions will need to be made—including finding the right lender for your mortgage. Here is a list of 10 questions to ask a mortgage lender when interviewing and researching your options.
What type of loans do you offer?
You may be surprised by this answer. Of course, there are conventional mortgages most of us are familiar with.
However, there are also VA loans, Federal Housing Administration loans and U.S. Department of Agriculture loans. The more options offered, the better your chances of finding the best fit for you.
Which type will be best for me?
Be sure to give the lender as much information as you can about your specific situation. As he or she begins to talk about your options, pay attention to the pros and cons for each option given.
Consider asking them to write the information down so you can review it again later.
What is the minimum down payment?
In general, 20 percent comes to mind as a minimum down payment for many. But you should ask your potential lender about other options. Some may ask as little as 3.5 percent and some may allow for zero down payment.
Do I qualify for down payment assistance?
Pay attention to your potential lender’s reaction when you ask this question. If you are met with a scoff, find a different lender.
Lenders who are familiar with local, state and national down payment assistance programs will be able to help you navigate the process. Some programs may come with features like zero down payment, waiving mortgage insurance requirements, and 100 percent LTV (when you are allowed to borrow a total of 100 percent of your property value).
What is the interest rate?
In terms of questions to ask a mortgage lender, this one is a no-brainer!
Several factors will determine your interest rate. For example, the amount of your down payment, the amount of your loan and your credit score all affect your rate.
What is the annual percentage rate?
Next, ask about your annual percentage rate (APR). This includes both the interest rate and additional fees the lender charges to create the loan.
The APR will give you a better idea of the actual cost of borrowing money.
Can I lock in the interest rate?
If you get a good interest rate—as in a low one—you should ask if you can lock it in. That way, if the market changes before you close, your rates won’t go up.
What is my loan estimate?
A loan estimate breaks down the important details of the mortgage. It clearly states the interest rate, the repayment terms and the closing costs, for instance.
Lenders are required to give borrowers the loan estimate within three business days after the loan application is completed.
What are the estimated closing costs?
Closing costs usually range from 2 to 6 percent of the loan amount. They cover costs like underwriting, appraisals and insurance as well as other fees associated with taking out a loan.
Some lenders are getting creative with concepts like using seller credits toward the buyer’s interest rate that result in significant monthly savings for the buyer. Ask us for more information about this!
How long will the process take?
Finally, ask how long the entire process—from applying to closing—will take. This answer will vary from lender to lender and loan to loan.
Summary
These 10 questions to ask a mortgage lender are a good start when it comes to finding the right lender for you. Remember, take your time and do your research before you submit your loan application. Keep reading our blogs for more industry news and tips!