Choosing a mortgage lender is just as important as choosing the right house. Before you settle for a lender, make sure you ask these important questions.
What are Your Loan Options?
You may not know all of the loan options at your disposal. Talking with the lender in-depth about your options can help you make the right choice. Ask the lender to explain each mortgage program you are eligible for so that you can choose the right loan for you.
Just because your neighbor took a 30-year fixed rate, conventional loan doesn’t mean that’s the right loan for you. Once you provide a lender with your qualifying factors and income situation, they can recommend the program that will be the most feasible for you.
What are the Closing Costs?
You’ll need more than just the down payment to buy a home. You’ll also have to pay the lender closing costs to close your loan. Asking about these costs ahead of time can help you choose the right lender. No two lenders will have the same costs. Because lenders must provide you with a Loan Estimate after you apply for the loan, you can compare the costs from different lenders side-by-side to choose the lender that is right for you.
Can I Get a Lower Interest Rate?
It never hurts to ask for a lower rate than the lender offers. Some lenders let you buy down the interest rate by paying discount points. Other lenders may be willing to negotiate with you, especially if you have good compensating factors, such as a high credit score or low debt ratio.
Before you jump at the chance to buy your interest rate down, though, think of the implications of doing so. Will the closing costs be too much to handle with the discount points? Will you stay in the home long enough to make it worth it to pay for a lower interest rate?
When Can You Lock the Interest Rate?
Every lender has a different procedure for locking in the interest rate. Find out early in the process what you have to do to lock your rate. This way when your desired rate becomes available, you can lock it right away.
Don’t forget to ask the lender if they charge anything to lock the interest rate. Some lenders do charge a lock-in fee while others don’t charge anything. This can also help you choose the right lender, especially if you are trying to keep your costs low.
What Happens if the Rate Lock Expires?
In a perfect world, you would close on your loan before the rate lock expires. In reality, this may not happen. You need to know what the lender will do if your rate lock expires. Will you be able to pay for an extension or will you be subject to the market interest rates at the time? This will be something you’ll want to consider carefully.
What is the Turnaround Time?
Each lender operates on their own timeline. When you buy a home, you operate on a schedule. You have a contracted closing date you must meet or you risk paying a penalty, or worse yet, losing the home. You need to find a lender that can work with the turnaround time you have so that you can ensure that you have plenty of time to close within your contracted closing date.
Are Your Taxes and Insurance Included in the Payment?
Make sure you are clear on what’s included in the mortgage payment when the lender provides you with a quote. Some lenders automatically include the real estate taxes and homeowner’s insurance because they want you to set up an escrow account. This ensures that the lender always knows that your taxes and insurance are paid on time.
If the taxes and insurance aren’t included in your payment, you may not be comparing the right payment. You may end up taking on a loan that you truly can’t afford because you have to cover the real estate taxes and insurance payments as well.
Asking lenders these questions can help you determine which lender is right for you. Ideally, you want the lender with the right turnaround time, lowest interest rate, and best closing costs. Of course, you may have to exercise a little give and take in order to get the most out of your loan, though.