Top Questions to Ask Your Mortgage Lender
Buying a house is a big deal and an important step in that is getting a mortgage lender. So how do you make sure you’re picking the right one? You make sure to do your research and ask the right questions! Not all lenders are the same, and it’s important to understand as much as possible before you move forward in the home loan process. Here are some of the most important questions to ask your mortgage lender before you commit.
What type of loan is best for me?
There are a wide variety of loan options for different people and circumstances. Mortgages can vary in length (10, 15 or 30 years) and in the terms of rate (fixed or adjustable), plus there are different types such as a VA loan for veterans or a jumbo loan for larger purchases. Your mortgage lender should be able to explain all your different options and which ones they think would be best for your situation. You wouldn’t expect a doctor to suggest a surgery before assessing you, so don’t go with a mortgage lender who will throw out a loan option without assessing your needs first! Communicating your needs and goals to your lender is key. Make sure you paint a clear picture of who you are and what you’re looking for to your mortgage lender so they can answer your questions and recommend the best mortgage for your needs.
How much do I need to put down?
There are two parts to the answer to this question; how much you’re required to put down and how much is recommended for your situation. The down payment requirements depend on the type of loan you’re getting. If you qualify for a USDA or VA loan, no down payment is required. If you’re getting an FHA loan, the minimum down payment is 3.5%. If you qualify for a conventional loan through either Fannie Mae or Freddie Mac, down payments start at 3%.
How much you should put down is a different answer. If you’re able to put down more than the minimum amount, then it could lower your monthly payment and overall interest that you’ll pay on your mortgage. Often if you put less than 20% down, you’ll have to pay private mortgage insurance (PMI) until you’ve paid 20% off. Speak with your mortgage lender to determine what that payment would be, plus how different down payment amounts will affect your monthly payment.
What are all of the costs?
There are many closing costs that are associated with buying a home, from lender fees to third-party vendor fees—including appraisals, credit reports, the title policy, pest inspection reports, escrow where applicable, recording fees, and taxes. Ask how much each line item will cost on its own as well as the total closing costs before you proceed. Understanding these costs will help you shop for a more affordable loan and avoid any unexpected surprises once you’re at the end of the process.
What is my rate?
This is an important question to ask because it will determine what your monthly payment will be, as well as how much interest you’ll pay over the life of your loan! A loan’s annual percentage rate (APR) is calculated through a formula that includes the interest rate and all the other related lender fees divided by the loan’s term. Not all brokers compute APR the same and APR does not account for early payoffs. Make sure to ask your mortgage lender about the adjustment frequency if your interest rate is adjustable, as well as the maximum annual adjustment, highest rate, index, and margin.
What is your average loan processing time?
Closing quickly can be important, especially if you’re buying a home in competitive markets. If you’re competing with other buyers for the same home, you’ll want to be sure your lender can close quickly. You must include a closing date to write a purchase contract properly, so you’ll have to coordinate this date with your lender. Ask about the anticipated turnaround time, if any anticipated obstacles could hold up closing, and how long after final application approval will the loan fund.
What will my monthly payment be?
Your monthly mortgage is only part of your monthly payment. There are other taxes and fees associated with a mortgage, plus if you put less down you may need to pay private mortgage insurance. The actual amount you’ll pay monthly is called your PITI (principal amount, interest, taxes, and insurance) which includes property taxes and whatever insurance coverage you choose.
How and how often will you communicate after I close?
It’s important to have effective and clear communication with your mortgage lender throughout the process, but does your mortgage lender communicate after the loan has closed? This might not seem important but being able to communicate with your mortgage lender after closing will benefit you in the long run.
You’re not limited to just these questions, but this is a starting point to things you should ask your potential mortgage lender. Starting the home buying process is intimidating, but the end result is so rewarding. Let Galaxy Lending Group help you finance your home with the best mortgage loan for you! Don’t worry, we have answers to all of these questions.