Many homebuyers are going to need a mortgage lender. Lenders are banks or companies that provide home loans to aspiring homeowners. They provide you with the necessary funds to buy a home. Every month you make payments toward your loan balance.
And while you're applying for a mortgage lender, it's always best to have questions in mind so you know what to expect to navigate the complicated world of home financing easily.
And while having a list of great questions is just the start, knowing the answers you're looking for keeps you one step ahead. Here are some of the top questions you should always ask your mortgage lender and why it's good for you to know about it.
What programs do you offer?
What are your lender fees?
Do you underwrite to mortgage guidelines? If not, what additional overlays do you have as a lender?
How much will my down payment be?
How much will my closing costs be?
Do you offer any down payment assistance programs?
What are your closing times? Under 30 days over 45 days
What are your hours? Are you available during evening and weekend hours in case I want to put in an offer after hours?
Do you do your due diligence upfront? Income and assets verification?
How soon and for how long can I lock in my rate.?
How often will I be updated on the progress of my lender?
What documents will I need for my pre-approval / pre-qualification process?
How long will it take to get me pre-qualified?
Which type of mortgage is best for me?
To help keep you away from a lender that prioritizes a sale, ask them for the best kind of mortgage option. If they want your best interests, they will be bold and tell you the pros and cons of each loan option rather than attempting to get you to agree with the one that will benefit them the most.
You may be appropriate for multiple options, so discussing them is worth it. Ask your lender about conventional fixed-rate, adjustable-rate mortgages, FHA, and VA loans.
What program will you be using?
DTI and credit scores will dictate the program. Ensure you are eligible to use your VA benefit they do and not just tell you to go FHA or Conventional route.
What will my fees and payments be?
When buying a home, you must know what kind of home you can afford. Not only should you create a budget and stick to it, but consulting with your lender can give you a better idea of your realistic expectations. Instead, they'll help review your income, assets, and credit, providing an affordable monthly cost and a breakdown of extra expenses.
Asking about your fees and payments gives you a better sense of financial understanding because now you can factor in details like interest rates, closing costs, and property taxes into your budget. Consulting an expert like your lender will ensure you get the proper budget breakdown.
Closing costs? Lender fees, points paid for rate, title, taxes, and insurance.
Am I in a flood zone? Will you need flood insurance, which may add another 200-300 to your payment?
Can you break down my payment for me? P&I, HOI, Property taxes, PMI?
What is my interest rate?
While this may be a common question and was probably already on your list, we're asking it again because we want you to understand interest rates fully. For example, did you know that lenders can fluctuate your mortgage interest rate in several ways, involving additional fees? You'll get an accurate estimated rate if you talk to different lenders. It would be best to ask your mortgage lender about your interest rate to determine how much interest you'll pay on your loan. Multiple factors determine your interest rate, including credit score, home location, down payment size, loan type, and the loan's term and amount.
It's also best to ask about your annual percentage rate (APR). Knowing your APR means you know the total cost of borrowing money, as you'll know both the interest rate and the fees the lender charges to originate the loan.
Is my rate fixed or variable?
How do you determine my rate, and what will it be? Is it at Par (paying no points) or buying down (if so, how much?)
If I'm buying down, what is my break-even point?
Do you offer a mortgage rate lock?
A mortgage rate lock is an agreement between you and your lender that states your interest rate will stay the same until closing, regardless of how the market moves. Having a rate lock is important because it keeps your costs predictable. Your rates won't fluctuate and will stay constant, meaning you don't have to feel the pressure of finding a home fast.
Asking your lender about rate locks can help you understand if it's possible. Also, find out about current market rates (high or low?) and whether you should lock your rate. In addition, some lenders will drop your interest rate if market rates decrease after it's locked, so be sure to check with your mortgage lender.
Some lenders charge a fee to lock in your rate. Others don't — but the cost might roll into your interest rate and other lender fees.
When can I lock my rate, and what rate lock terms do you have for 15, 25, 30, 45, or 60 days?
What is the cost of my rate?
Once I lock in a rate, can I relock again, and if so, how much will that cost?
Do you offer pre-approval or pre-qualification?
Both pre-approval and pre-qualification are two terms that often get confused with one another. Ask your lender about their differences because they usually mean different things.
To get pre-qualified, a lender asks questions about your income, credit score, and assets to estimate how much of a loan you can get. Of course, they usually don't verify this information, so misreporting it will change your loan amount.
The same checks happen when getting preapproved, but your information gets verified, meaning lenders will request official documents, giving lenders an accurate loan figure.
Consulting with your lender will help you decide which process is the best for you.
As a lender, will you verify all my income and assets upfront before I shop for my home?
It's essential to obtain a PQ to go out and shop.
Will I have to pay mortgage insurance?
If you put down less than 20% on a conventional loan, the answer will probably be "Yes." Mortgage insurance on government-backed loans works differently, which could apply to you if you're looking for an FHA loan.
Even if the mortgage insurance is "lender paid," it's likely passed on as a cost built into your mortgage payment, which increases your rate and monthly payment. You'll want to know how much mortgage insurance will cost, whether it's an upfront or ongoing charge.
Or you may find other loan programs you qualify for that don't require mortgage insurance which is an additional discussion beneficial to have with a lender.
Will my loan have Mortgage Insurance or PMI if I do not put down 20% or more?
Final Thoughts
These questions serve as a starting point for opening discussions with lenders. The more you ask, the more you know, and the more clarity you'll have on the financial side of the home-buying experience. Asking your lender a handful of questions ahead of time can help make purchasing a home more accessible and less stressful for you.
Finding a lender is something we can help you with. All you need to do is speak with your agent. Once you're ready and prepared, ensure credit is strong, a budget is determined, and mortgage options are understood.
Contact us at 210-879-8220 or send us a message if you're seeking our help finding a lender. You can also follow us or message us on Instagram and Facebook!
