10 Questions to Ask Lenders when Shopping for Mortgage
When buying a home, selecting a mortgage lender is one of the big decision. Doing your research and asking questions is important when looking for a mortgage lender. Not all lenders are the same, always ask questions of your potential mortgage lender and understand as much as possible before you commit to a loan. Here are the 10 mortgage questions you should be asking your lender when shopping for mortgage.
1. Which type of mortgage is best for me?
There are several different types of mortgage programs. From FHA to Conventional loans. You need to know which type of mortgage you are getting. When you ask, “What are my options?” for each type of loan discussed, the mortgage lender should tell you the pros and the cons in light of your particular situation. You may also want to ask whether there is any down payment assistance program that you may qualify for.
You might be interested: FHA vs Conventional: Which mortgage is Right for You?
2. What is the interest rate?
Right off the bat, you should ask your lender for a direct interest rate quote, as well as the corresponding annual percentage rate (APR) for the loan. Since the APR accounts for fees and other loan-related charges, it gives you an apples-to-apples comparison among lenders.
You might be interested:How Rising Interest Rates will Impact Housing Affordability?
3. How much down payment do I need to put down?
A 20% down payment will give you the best rate and term, but you have choices too. Qualified buyers can find mortgages with as little as 3% down, or even no down payment. Again, there are considerations for every down payment option. The best lenders will take the time to walk you through the choices.
Read: How Important is Your Down Payment when Buying a Home?
4. How much are origination fees and discount points?
Lenders charge origination and discount points in certain cases. Origination fees are a fee charged by the lender for originating the loan. A discount point is a fee paid in advance to the lender for a reduced interest rate. (1 point = 1% of your total mortgage amount.) Be sure to ask your lender how many points are included in the quoted interest rate and what the benefits might be to buying more or fewer points.
5. What are my estimated closing cost?
The costs of a loan include not only fees that go to the lender, but also related third-party vendor fees. These can include appraisals, credit report, the title policy, escrow where applicable, recording fees, and taxes. Ask for a copy of loan estimate cost sheet that show complete breakdown of the costs associated with your loan as well as in any closing costs.
6. When can I lock the interest rate?
Interest rates always fluctuate. Sometimes, locking in a low rate can really pay off. Ask your lender when you can lock a particular rate and for how long. Keep in mind, lenders will usually offer lower interest rates for shorter-term locks and higher interest rates for longer-term locks.
7. Will I have to pay mortgage insurance?
If you put down less than 20%, the answer will probably be “Yes”. The private mortgage insurance (PMI) normally is added into your monthly mortgage payment. You will want to know just how much mortgage insurance will cost and if it’s an upfront or ongoing charge, or both.
8. Will escrow be included in my payment?
Escrow is a separate account in which you pay monthly that goes towards property taxes and insurance. You can either pay it out of pocket or set up escrow. Some mortgages will require you do escrow. This is beneficial to the borrower as well so they don’t have a large bill at the end of year they are not prepared to pay.
9. How much time do you need to fund?
The average loan processing time falls between 21 and 45 days. You must include a closing date to into purchase contract when making an offer. So you will need how long the lender take to process the loan and have to coordinate this date with your lender.
10. Is there anything I can do to increase my credit score to get a better rate?
Since your interest rate is tied to your credit score. It makes sense you should do everything possible to get your credit score as high as possible. Your lender may have some tools that can read your report and give you an idea of what you can do to increase your credit score. A common thing that will improve most peoples credit score, is paying down credit card balances. Your credit utilization ratio is your credit card balance compared to the card limit.
If you are a first-time home buyer you should be asking all of these questions. There are many mistakes made by first-time buyers you can avoid by asking these mortgage questions. Keep in mind, too, that the more your broker knows about you, the better advice, assistance, and accurate information it can give you. Don’t hesitate to share your personal information, including giving permission for the lender to run your credit report.
Swee Ng, Realtor and Phoenix East Valley resident specializing in win-win real estate transaction through great communication and fighting for his clients’ best interest. After all, this is more than real estates, this is about your life and your dreams.
If you are looking to buy or sell your home in Phoenix AZ area, we hope you will consider us. Contact us today for complimentary consultation.
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