Buying a home is a complex process. Even though you’ve likely done some research in advance, you may have additional questions. Here are some questions to ask a mortgage lender that could help guide your conversation and get the information you need to know before you buy.
What types of loans are available, and which might be a fit for me?
When you first approach a lender, ask what types of loans are available to you. Don’t be shy about asking questions about anything mortgage related, because mortgage pros are more than willing to discuss the ins, outs, and complexities of home loans.
What’s the difference between being pre-qualified and pre-approved?
Lenders often use the terms prequalified and preapproved interchangeably, but technically, they often mean very different things.
A pre-approval is a preliminary evaluation of a potential borrower by a lender to determine whether they can be given a pre-qualification offer. A pre-qualification, on the other hand, is when a lender estimates in advance how much you can borrow to buy a home, based on financial and other information (such as employment history) that you provide.
How much should I save for a down payment?
It depends on your situation and what home loan you are applying for. If you happen to qualify for a USDA or VA loan, no down payment is required. If you’re getting an FHA loan, the minimum down payment is 3.5%. If you qualify for a conventional loan through either Fannie Mae or Freddie Mac, down payments start at 3% and in no event would you have to put down more than 5% of the purchase price on a primary residence.
What will the interest rate and APR be on my loan
Many people focus on interest rates, which are definitely an important component to consider, but it is also important to understand annual percentage rate (APR). 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. This 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.
What costs are associated with the mortgage loan?
Any mortgage comes with some associated costs. For example, mortgage points or discount points are fees that you might pay to a lender to secure a lower interest rate. Then there are closing costs associated with creating documents and funding the loan. Other costs you could have to pay during the process are:
- Real estate appraisals
- Credit check processing fees
- Title fees
- Escrow fees
- Recording fees
- Home inspection fees
Do you have in-house underwriters?
Underwriting is the process of verifying all the information you provided and making sure you qualify for the loan. It’s important that you know whether the lender will be handling the underwriting and what to expect during the process. When underwriting is done in-house, it can significantly decrease the amount of time it takes for your loan to be processed.
What is your average loan processing time?
Find out what the average loan processing time is. Usually, lenders work to close loans in 30 days or less. 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.