It pays to be curious.
Considerations when buying or refinancing a property It’s difficult to keep track of loan kinds, mortgage rates, points, and closing charges. That’s why it’s critical to query your lender. With a little knowledge, you can completely comprehend your home loan. And you can tell whether you’re getting a terrific bargain or simply a good one.
16 mortgage lender questions
1. What mortgage loans do you provide?
Conventional and government-backed mortgage loans are the two primary types. The best loan for you depends on your salary, down payment, house price, credit score, and other criteria. If your situation is unique, you may require a tailored home loan. Persons with bad credit or low income, contract and self–employed employees, people with no more than two years of job experience, etc. Your lender should be able to explain which loan is best for you and why.
2. Do I qualify for home loans? Do you have any I may like?
Each lender may decide which mortgages to offer. So be sure the lender you’re contemplating provides the mortgage that best suits your requirements. VA loans, for example, are excellent loans. No lender offers VA loans. The same goes for USDA loans, jumbo loans, bank statement loans, and specialty loans like teacher or doctor loans. Assume your lender can provide you with the finest loan. Do some research and ask your lender.
3. Can you explain my Loan Estimate?
There are three pages in the Loan Estimate (LE) detailing the proposed loan’s interest rate, payment amount, and closing costs. Loan estimates have replaced Good Faith Estimates since 2015. Although the LE is easier to read than the GFE, your lender should still help you understand the information on this form. To get the greatest possible bargain on a mortgage, you need to know your LE’s data.
4. Do loan discount points come with your rate?
Homeowners who wish to pay a fee upfront to get a reduced interest rate might purchase mortgage discount points. Discount points are optional. The cheapest cost isn’t always the greatest bargain if you have to spend a lot on it.
Affording points may be more costly than saving money on interest if you only intend to live in the home for a few years. Paying discount points may be worthwhile if you intend to maintain your mortgage for decades. Solicit from your lender a detailed breakdown of loan discount points and how they affect final loan expenses.
5. Do you charge an application fee or a credit report cost?
Applying for a loan is not free Application fees cover expenditures such as credit checks and administrative charges. The application cost varies based on the lender and the amount of labor involved. Some lenders charge nothing. In fact, several states ban application costs. Ask about these fees before applying to avoid any surprises. Whether you’re only checking to see if you qualify for a loan, it’s preferable to contact a lender with no application costs.
6. What charges or fees must I pay before closing?
You may need to pay charges before closing day. Make sure you are aware of them so you can prepare accordingly. For example, most lenders want payment at the time of service. Because an appraisal is one of the initial requirements for a mortgage, this charge is usually paid shortly after the loan application is submitted. Any extra expenses due prior to closing should be provided by your lender.
7. Do you charge for a lock?
If you and your lender agree on a mortgage rate lock, you guarantee that the rate will not change until closing. Understanding your rate lock helps you budget and plan for your loan payments. Many lenders provide free 30-day or 60-day rate locking. Some lenders charge for a longer lock time.
8. Do you provide interest rate “float down”?
The float-down option enables customers to lock in their mortgage rate but may decrease it if rates fall throughout the application process. Ask about float-down possibilities, since not all loans provide these. Others may provide them, but with different qualifications. A float-down option is particularly advantageous when interest rates are lowering and are projected to decrease more before your loan closes.
9. How long from application to close would my loan take?
This question is important for many reasons. First, if your lender quotes a 30-day rate but needs 45 days to settle your loan, you should know how this may affect you. This includes both new and refinancing loans. Another explanation for this query is that we are in a hot real estate market with several bids. Your offer may be less competitive if your lender requires more time to finalize your loan. Closing timeframes might vary greatly based on a lender’s workload. Knowing the closing time might help you select the best loan.
10. Will I be charged rate lock extension fees?
A 30-year mortgage rate lock normally lasts 30–45 days, while some lenders go up to 60 days. If your rate lock needs to be extended, you may be charged. Because extension costs may be as high as 1% of your entire loan amount, it’s important to know who is accountable for them.
11. Do you provide mortgages that do not need PMI?
Mortgage insurance (PMI) safeguards the lender against default. It is required for the majority of loans with less than a 20 percent down payment. Numerous homeowners dread paying mortgage insurance premiums. It adds several hundred dollars to the monthly cost of your mortgage. For borrowers with less than a 20% down payment, a number of lenders offer financing programs without monthly mortgage insurance payments. Please consult your lender. If not, search for a lender that does.
12. Can I cancel my mortgage insurance later?
If paying mortgage insurance is a major worry, find out how it works with each loan type. Insured mortgages, like FHA loans, need no down payment. This can’t be changed until you refinance later. Mortgage insurance on conventional loans is supposed to expire after a given period or a specific proportion of the loan total is paid off. Your lender may tell you when you can cancel your mortgage insurance. However, three or five years down the line, your servicer may not be your original lender. Your future servicer will determine when you may cancel PMI.
13. Are there any prepayment penalties?
Some lenders impose a fee if you pay off your mortgage early in whole or in part. It may apply if you opt to refinance. By paying back their principle slowly over time, the penalty charge allows mortgage lenders to collect additional interest. While FHA, VA, and USDA loans do not carry early payback penalties, other loan types may.
14. How frequently should I anticipate loan updates? And who?
Poor lender communication might add to the burden. Most lenders follow up with mortgage borrowers. Ask about this so you and your lender are on the same page. Some lenders allow you to track your loan’s progress online. Worry-free lenders provide on-demand updates.
15. Do you deal with any down payment help programs?
Down payment assistance (DPA) may be a huge aid to prospective homeowners who lack funds for a down payment. DPA programs give grants or low–interest loans, some of which are non–repayable. Some lenders may have access to programs that others may not. Some may have more expertise with DPA and may guide you through the process more smoothly. If you require DPA, look into the choices in your region. Then ask your lender about their programs and whether you qualify.
16. Do you sell loans after closing?
In some cases, homeowners are astonished to hear that their mortgage was sold soon after closing. That’s great news, though. The term of your loan, the interest rate, and the monthly payment will remain the same. The lender was able to create further mortgages by selling the debt. Ask your lender about the status of your loan after closing.
The ideal mortgage is unique to each person
A good mortgage product is hard to get by Choosing the appropriate loan and lender for you may save you thousands, if not tens of thousands of dollars. So question your lender before you sign. Your loan officer will assist you, but only you can verify you have covered all areas and gotten the greatest price.