Shopping for a mortgage can be stressful, so here is a list of questions to ask your lender to help guide you through the process.
WHAT TYPE OF LOANS DO YOU OFFER? WHAT ARE THE QUALIFYING GUIDELINES FOR EACH LOAN?
Don't be afraid to ask the lender to take the time to explain the pros and cons of each loan, and ask why they think a specific loan would work best in your situation.
WHAT ARE THE INTEREST AND ANNUAL PERCENTAGE RATES (APR)?
The interest rate is going to be based on the size of loan and on your current credit score. Interest grows over the life of your loan and can add up significantly.
WHAT IS MY MONTHLY PAYMENT GOING TO BE?
While trying to developing a budget after your home purchase, you'll need to know what your monthly expenses are going to look like. Be sure to include taxes and insurance into the calculations.
HOW LARGE OF A DEPOSIT DO YOU NEED?
Interest rates and monthly payments vary considerably depending on the size of your down payment. This also factors into whether you'll be required to pay mortgage insurance.
IS THERE A PREPAYMENT PENALTY?
If you are saving up to make some extra mortgage payments, it's important to make sure your lender won't charge for paying off your loan early. Some lenders charge a processing fee for each overpayment, while others ask for six months of unearned interest.
WHAT FEES & COSTS WILL I HAVE TO PAY?
Every lender will charge differently, and you’re entitled to know. Costs generally include an appraisal, credit report, title policy, pest inspection, escrow, recording fees, and taxes. Most fees are included in closing costs once the transaction is ready to be finalized.
HOW LONG DOES IT TYPICALLY TAKE FOR A MORTGAGE TO GO THROUGH? CAN YOU GUARANTEE YOU’LL CLOSE ON TIME?
Closing varies from lender to lender, while most should be able to close between 30-45 dates from application. To expedite this process, it's a good idea to have all required documents ready beforehand and stay in constant contact with your lender.
WHAT ARE MORTGAGE / DISCOUNT POINTS AND HOW DO THEY AFFECT MY LOAN?
One way to get a lower interest rate is through mortgage or discount points. Mortgage points are fees the borrower can pay the lender in exchange for a reduced interest rate and, eventually, lower monthly mortgage payments. If you plan to own your home for a long time, it’s worth asking your lender whether this is an option for you. If so, make sure it’s cost effective by comparing how much you’d be saving each month against how much it costs to buy points.
WHAT ARE CLOSING COSTS? HOW MUCH WILL MINE BE?
Some of the largest expenses involved in the purchase of a home are closing costs. Closing costs are fees that are paid at the end of the transaction, once the home is ready to be transferred from one owner to another. These costs can be paid by the seller, the buyer, or shared by both.
WHAT IS ESCROW AND HOW MUCH WILL IT COST ME?
The term escrow refers to the period between the time the buyer agrees to purchase the property and the closing of the transaction or when the title of the property is transferred to the new owner. At the beginning of this escrow process, you will be asked to deposit money into an escrow account. Once you’re ready to start the process of buying the home, your lender will ask that you deposit money into the account as a guarantee that you will fulfill the contract. The amount you’ll be asked to deposit depends on the home’s price and the terms of the agreement.