Buying a home is a complex process, and you likely have a lot of questions to ask a mortgage lender before you get started. And even though you’ve likely done some research in advance, you probably have additional refinance questions, mortgage loan questions, and others. It’s great that you want answers!
When you reach out to a pro, here are some questions to ask a mortgage lender that could help guide your conversation and get the information you need to know before you buy.
1.What types of loans are available, and which might be a fit for me?
When you first approach a lender, ask what types of loans are available to you. Don’t be shy about asking questions about anything mortgage related, because mortgage pros are more than willing to discuss the ins, outs, and complexities of home loans (after all, it’s their job).
2. What will the interest rate and APR be on my loan?
Many people focus on interest rates, which are definitely an important component to consider, but it is also important to understand annual percentage rate (APR). APR is a more accurate picture of exactly what the loan is going to cost you each year, as well as over the duration of the loan. You should also ask your lender if lowering the interest rate is possible, and whether you can pay for discount points to get a lower-interest loan.
3. What costs are associated with the mortgage loan?
Any mortgage comes with some associated costs. For example, mortgage points or discount points are fees that you might pay to a lender to secure a lower interest rate. Then there are closing costs associated with creating documents and funding the loan. Other costs you could have to pay during the process are:
- Real estate appraisals
- Credit check processing fees
- Title fees
- Escrow fees
- Recording fees
- Home inspection fees
4. Is there a penalty for early repayment?
Paying a mortgage off early can reduce costs in the long run because there will be less interest to pay. But you should always consult your mortgage lender to make sure that there is no prepayment penalty for paying off your mortgage early, and make sure to know what options without prepayment penalties exist for you.
5. Does the lender have in-house underwriters?
Mortgage underwriters are responsible for reviewing applications, making conditions for approval, or denying applications. When underwriting is done in-house, it can significantly decrease the amount of time it takes for your loan to be processed. If underwriting is not done in-house, ask how long the underwriting process generally takes your mortgage lender.
6. How long will it take to fund the loan?
The amount of time that it takes to fund a loan is information that you need to know, because when you set up the purchase contract, you will have to choose a closing date. Not securing funding by the closing date can cause serious problems — especially if you are ending a lease at your current residence or have a specified move-in date at your new home. Check with your mortgage lender to get an idea about the date of funding. Ask all of the questions that you have, and be sure you are choosing an appropriate closing date.