When you are choosing a mortgage, there are some important questions you need to ask your lender. You need to make sure the terms of your mortgage match your expectations and your requirements.
If you know the right questions to ask the lender, you could avoid an expensive mistake when buying your home.
What Home Loan Options Do You Have Available?
What Home Loan Options Do You Have Available?While all mortgage lenders offer fixed-rate and adjustable-rate mortgages, the terms they offer won't be exactly the same.
Do they offer the type of loan program you are looking for? Do they have FHA, VA, or USDA loans available?
If you want a conventional mortgage over something other than 15 or 30 years, does this lender have those options available?
How long is the fixed-rate period on their adjustable-rate mortgages? If you expect to move out of the home in only a few years, you might be able to save some money before the interest rate adjusts. Can you do a rate lock and how long will it last? Can you pay off your mortgage early penalty-free?
Which Mortgage Do They Recommend?
During your discussion with the lender, you will need to give them plenty of information on your situation and requirements. Based on these details, they should be able to recommend the best type of mortgage for you.
Ask them to give you this recommendation in writing as well as alternative options, so you can more easily compare which one is the right for you.
If you don't fully understand some aspects of the terms or some of the charges, make sure to ask for an explanation. If you aren’t happy with their answers, you can always go to another lender.
What Interest Rate Will Be Charged?
Typically lenders advertise two interest rate figures. The lower figure will be the base interest rate charged on the mortgage loan, the higher figure is the annual percentage rate. The APR is the base interest rate plus mortgage fees.
When there’s a larger gap between the two figures, it means there are more costs associated with the loan.
What Will the Loan Estimate Be?
Your loan estimates will include all of the costs related to the mortgage as well as closing fees. Your lender is required to provide this estimate to you within 3 days of your completed application.
Any significant change that will affect your mortgage costs will mean they have to send you a new loan estimate. However, smaller changes to mortgage fees can result in your estimate varying slightly. Though other fees, outside of the control of the lender, can vary by as much as 10%.
A closing disclosure will also be provided to you 3 days before your closing date.
How Long Will the Loan Take to Process?
Finding out what their average processing time is for a home loan, could be important. If the seller is in a hurry, they want a buyer who will have their financing completed quickly.
Who Does the Underwriting for the Loan?
Before your mortgage is approved, the underwriting process will make sure you qualify for the loan you want.
If this is carried out by the lender, how long will it be before you get any updates? How can you send follow-up details to them, and what can you expect to happen during the underwriting process?
What Will the Servicing Charges Be?
Servicing fees are the charges for collecting and dealing with your mortgage payments. Some lenders will have a fee when using their online payment service.
It is better to find out about these hidden fees so that you don't get surprised by them later.
However, sometimes the lender won't know exactly how much you will be charged for servicing the loan. Sometimes the lender will sell the servicing rights to another company, earning them some extra money.
How Often Will the Lender Check Back With You?
While communication is going to be important during the financing process, there can also be benefits throughout your mortgage term.
Does the lender offer advice or check if your chosen mortgage is still right for you regularly after you've closed on the home? If they do, it could benefit you so that you can make changes to reduce the cost of your mortgage.
Since buying a home is the most expensive financial commitment most of us ever make, any advice that could make slight savings could have more significant and long-term benefits.
What Will the Lender Do If the Appraisal is Lower Than Expected?
Your lender will need an appraisal to make sure the home is worth the amount you have offered to pay for it. If there is a big difference, the lender could take a loss should you default on the loan.
In a quickly rising market, there is a greater chance the appraisal will come in low, and the lender isn't likely to loan more than the home is worth. For this reason, knowing what will happen if the appraisal is low is important.
You might be able to renegotiate the purchase price with the seller or try to find the difference yourself if you want to keep the purchase moving forwards.
What is Needed on Closing Day?
When your closing date arrives, you need to have everything ready. Your lender should tell you what is required before the time comes, but it doesn't hurt to have an understanding of what will be expected up front.
You might only need to bring a cashier’s check for your closing costs and a form of ID like a driver's license. But by checking beforehand what your lender requires, you won't be surprised or caught off guard by what is needed.
Will Your Mortgage Be Sold?
While you might expect your lender to continue to collect your monthly premiums to recoup your home loan amount, this might not be the case. In fact, it is very common for mortgages to be packaged up and bought by major investors.
An organization like Freddie Mac or Fannie Mae could end up owning your loan, but that doesn’t necessarily mean that you’ll no longer deal with your lender.
It is still the job of the company that is servicing your loan to deal with any issues. So if you are struggling to make your payments, it will be the servicer, which could still be your lender, who you should contact.
Final Thoughts
If you are purchasing a home and need to obtain financing these are the top 11 mortgage questions you should be asking your mortgage lender. By doing so you'll understand exactly what you're getting into, so you won't be surprised after closing on your new home.
