Doing your research and asking questions is important when looking for a mortgage lender. 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.
Loan terms, rates, and products can vary significantly from one company to the next. When shopping around, these are a few things you should ask about.
1. What Types Of Home Loans Do You Offer?
Now that you know the types of loans available to you, it’s time to find a lender that can match you with the right option for you. This starts with asking your lender what kind of loans they offer. If you’re looking for an FHA, USDA or VA loan, are all options offered? Does the lender have special financing options for condos? The more options a lender offers, the more likely you are to find one that best matches your unique needs as an individual.
2. Which Type Of Mortgage Is Best For Me?
As you have the conversation with a lender, make sure to give plenty of detail on your situation and answer any questions they have. Never be afraid to ask why. If a fee or cost looks odd to you, make them explain it. If you feel comfortable that they seem to know what they’re talking about and have your best interest in mind, move forward. Otherwise, feel free to go elsewhere.
3. What Will My Interest And Annual Percentage Rate Be?
When lenders advertise interest rates, there are two rates you’ll see. The first is the base interest rate you’re getting charged for the mortgage. The second interest rate is the annual percentage rate (APR). The APR is higher because it factors in the base interest rate plus the closing costs associated with the loan. One important point to remember is that the bigger the difference is between the base interest rate and the APR, the more the lenders are charging in fees. Your lender should also be able to explain the factors that go into deciding what your interest rate is.
4. What Is The Loan Estimate?
A loan estimate is a complete breakdown of the costs associated with your loan as well as in any closing costs. Lenders are legally required to give you this estimate within 3 business days of your completed application. If there’s a change to your loan that will materially affect the mortgage costs, they have to send you a new loan estimate. Your loan estimate will include the basic terms of the mortgage as well as all costs associated with the loan.
5. What Is Your Average Loan Processing Time?
Ask the lender what their average loan processing time is. Refinances close a little quicker because an appraisal may not be always required, and there’s no home inspection. Processing time can be particularly important in a purchase situation because sellers will be looking for someone who can get their financing squared away fast in order to move on with the next stage of their life.
6. What Will I Get Charged For From A Servicing Perspective?
Servicing is the process of collecting and processing your payment and handling your escrow account after your loan closes. It’s important to ask your mortgage lender about any hidden fees that might come up. For example, many lenders have an online payment service fee. This means that every time you go to make a payment online, you can be charged more than your payment amount.
7. What Do I Need To Bring To The Closing Table?
Being prepared and having everything you need for closing is important. The first step to preparing to close on your new home is to communicate with your lender about what you need to bring to the closing table.
8. What Happens If My Appraisal Comes In Low?
It’s important to understand what your mortgage lender does when the appraisal comes back too low. A low appraisal can affect how much a mortgage company will loan you and how much you’ll have to pay out of pocket.