Having a list of mortgage questions to ask potential lenders is just the start. Knowing the answers you’re looking for gives you a head start.
1. What type of mortgage is right for me?
This question will help you determine whether you are talking only to a producer – a salesperson – or a quality advisor. When you ask, “What are my options? For each type of loan discussed, the mortgage lender should tell you the pros and cons depending on your situation.
2. How much down payment do I need?
A 20% down payment is ideal for any lender, but it is not always required. Qualified buyers can find mortgages with as little as 3% down, or even no deposit. Again, there are considerations for each possibility of down payment. The best lenders will take the time to guide you through the choices.
3. Am I eligible for down payment assistance programs?
If you really want to assess the value of your mortgage lender, this is the question that will do it. If you get a laugh or a moan in response, move on.
Lenders with knowledge of local, state and national markets down payment assistance programs – and the means to help you navigate the process – are well worth the hunt.
4. What is my interest rate?
You’ve probably already planned to ask this mortgage question. It is the only reference that we all understand. Or U.S ? Lenders can move the needle on your mortgage interest rate several ways, most involving additional charges.
But after talking to at least a few lenders, you’ll get an idea of the approximate interest rate you’ll qualify for. Let’s say it’s 5%. We’ll call this the interest rate on your payment, because that’s what your monthly mortgage payment will be based on.
Knowing this, you will move on to the next – and very important – question, on the annual percentage rate, or APR.
By the way, if you are considering a adjustable rate mortgage rather than a fixed rate loan, you’ll want to ask: How often is the payment interest rate adjusted? What is the maximum annual adjustment? What is the highest rate cap?
5. What is the annual percentage rate?
Now that you have an idea of your payout rate, it’s time to find out what your payout rate will be. annual percentage rate is. The difference between the two? The APR integrates all the integrated costs of the loan.
Ask your lender if applicable reduction points are included in your APR. The answer you are looking for is “No”. You can always decide later to buy discount points, which are additional fees that you pay up front to lower your interest rate.
When you have point-of-discount APRs from competing lenders, you can see who has the lowest fees for the same payment rate.
In our example of receiving a 5% payout rate, you are looking for the lowest APR based on that payout rate. Maybe a lender offers you an APR of 5.25% and another an APR of 5.5%. The 5.25% APR lender charges you less fees.
A higher APR isn’t always a bad thing.
Say you buy your “home forever. “If you buy discount points to lower your payment rate, you will have a higher APR. But after a few years, you will offset the extra costs by paying less interest through that lower payment rate.
6. Are you doing a serious credit check today?
It’s always good to know when the lender is going to perform a “hard” credit check, called “serious investigation. “This type of payment history survey shows up on your credit report. Lenders must do this to give you a firm interest rate quote.
When shopping with multiple lenders, you’ll want those credit calls to happen in a short period of time, say about a week or so, to minimize the impact on your credit score.
7. Do you charge an interest rate freeze?
Once you’ve chosen a lender, you might want to lock in your interest rate at some point. This ensures that it doesn’t go up – although it doesn’t go down either.
The answer you are looking for on a typical home loan (not a construction loan) is: There are no interest charges rate foreclosure.
8. Will I have to pay mortgage insurance?
If you put less than 20%, the answer will probably be “Yes”.
Even though the mortgage insurance is “paid by the lender,” it is likely passed on as a built-in cost with your mortgage payment, which increases your rate and monthly payment. You’ll want to know how much mortgage default insurance will cost and whether it’s an up-front or an ongoing charge, or both.
Then ask the lender what your options are. The answer can be simply, “Make a bigger down payment.
Or you might find that there are other loan programs you may be eligible for that don’t require mortgage insurance.
9. What will my monthly payment be?
You’ve probably asked this question before. But knowing what you monthly mortgage payment will be kind of a key to the whole deal, right? You’ll also want to ask if there is a prepayment penalty if you prepay the mortgage, such as moving or refinancing. The answer should be “No”.
10. Do you have origination fees?
A original fee provides additional profit to the lender beyond what is built into the interest rate. A good follow-up question: what are all your lender fees? Be sure to specify “lender fees”. They will know what you mean because there are additional costs as well, which you will then ask.
11. What other fees will I pay at closing?
Fees charged by third parties, such as for an appraisal, title search, property taxes and others closing costs, are paid when the loan is signed. These costs will be detailed in your official loan estimate document and your closing statement almost in time for signing. But the sooner you know what they are, the better you’ll be able to buy, compare, and prepare for them.
12. How and how often will I be informed of the progress of the loan?
Will you have a single point of contact throughout the mortgage loan process? And how will you be informed of the progress: by e-mail, by phone or via an online portal? Establishing your service expectations in advance and seeing how eager the lender is to meet them will give a clear point of comparison between lenders.
13. Do I have to sign all documents in person?
Due to social distancing requirements brought on by the coronavirus pandemic, electronic signing of closing documents is becoming increasingly popular – and necessary.
A mortgage e-closure is likely to go faster than a traditional mortgage closing, and you’ll likely be better informed about what’s going on every step of the way.
Another advantage of electronic closures: electronic documents cannot be submitted with a missing signature. On a paper document, a missing signature may not be detected immediately, causing headaches and delays.
14. How long before my loan closes?
Of course, you want to know what your target closing and move-in dates are so you can prepare. And just as important: ask what you should avoid doing in the meantime – like buying new furniture on credit and other anti-lending behavior.