Questions to Ask Your Lender
January 1, 2021
Questions to Ask Your Lender
In an ideal world, the hardest questions when finding a new home would be about kitchen backsplashes or choosing between carpet and hardwood floors. Unfortunately, this is not the case. There are many important questions at all stages of the process and knowing which to ask can make your life as a home buyer much smoother and stress-free. Luckily for you, we are in the business of stress relief and are here to share insight to make your life as a homebuyer easy as can be. Here are ten questions to ask your lender that we guarantee will make you a more informed and empowered borrower:
What type of loan is best for me?
Loans should be unique to you and your lifestyle; this is not a “one size fits all” kind of business and any reputable lender will be well aware of this. Make sure you are choosing a lender who is focused on getting to know you in order to make the best loan recommendation possible. Ask for the pros and cons of adjustable-rate loans, interest-only loans, fixed-rate loans, and negative amortization loans and a thorough explanation of how they would fit into your life. You would not take medical advice from a doctor who hadn’t reviewed your medical history or legal advice from a lawyer who hadn’t looked over your case file. Hold your lender to the same standards.
How much of a down payment is required?
Normally, a 20% down payment is required for loans. However, this is not always the case. If you're well-qualified, you might be able to pay significantly less. Remember, a lower down payment has pros and cons and can be the right choice for some borrowers and not for others. As always, be sure to discuss all available options to make a decision that’s best for you.
What will the total housing payment be?
Figuring out what your monthly mortgage payment will be is an important part of choosing a home. But it is not the whole picture. There are added costs for things like homeowners insurance, property tax, and Homeowners Association fees. You might even have mortgage insurance premiums if your down payment was less than 20%. These things add up and are important to keep in mind when setting your budget.
How long will the process take?
When it comes to buying a home, you can expect the process to be a fairly long one. Therefore, it is important to establish expectations regarding timing from early on in the process. Asking your lender for a timeline will not only help you plan accordingly but will also give your lender a deadline from the very beginning of your working relationship.
Why do mortgages get declined?
The last thing you want or need is to get a great rate and affordable down payment on your dream home only to have your loan denied at the last minute. Make sure you avoid landing in this situation by figuring out what mistakes others have made so you don’t repeat them.
How long is my rate good for?
Getting a good interest rate is key for any loan. But some rates might not last as long as you think or want them to. Be sure to ask about your rate to make sure 1. you’re getting the lowest one possible and 2. the rate will remain where you want it to for as long as possible.
Do I qualify for down payment assistance programs?
Some people and/or pieces of property themselves will qualify for down payment assistance programs. Asking your lender this question could save you money and also shows if they have knowledge of the different state and national programs available.
What invisible costs should I be budgeting for?
You will have fees from third parties like a title search, appraisal, property taxes, and other closing costs to pay when you sign your loan. Federal law requires them to be listed in your official Loan Estimate document and Closing Disclosure, but the sooner you have a clear picture of all costs you are responsible for, the quicker you can establish a budget that doesn’t leave you with unexpected costs towards the end of the process.
How often will you update me on the loan’s progress?
Strong communication between you and your lender is vital for a smooth, stress-free process. You want to make sure that you are receiving all important information in a timely manner and have a good, reliable relationship with someone who can answer your questions and make sure your loan is handled efficiently. Will there be one point of contact throughout the process? Will you be updated via text, calls, emails, or a portal? How often should you expect a check-in? Asking these questions and deciding on a communication strategy that works with your lifestyle will make the whole process so much easier. If a lender isn’t willing to give you this kind of personalization, it might be worth looking at other options.
Any other questions you might have.
This might seem like a pretty obvious question. But you would be surprised how many new borrowers don’t ask questions they might have for fear of sounding uneducated or uninformed. Remember: there are no stupid questions. Most people are never properly taught about the mortgage process. Therefore, you are not alone if you feel confused or overwhelmed. Ask the questions so you can be the most empowered borrower possible. And remember, we are always here to help.