The home buying process can be stressful, expensive, and time-consuming. But you can reduce the toll it takes on you by knowing what to look for when you need a loan. As an informed consumer, you can expect to receive the best results when you are purchasing a house. Below are some of the best questions to ask when you meet with local mortgage companies.
What type of loan is best for me?
There are several of different loan types out there and part of obtaining a loan is finding the best fit for you. If you are a veteran, more than likely a VA Loan would work best and if you’re a seasoned homebuyer with a lot of capital more than likely a Conventional Loan would be your best bet. Knowing your goals will also help clearly define what you are looking for in a loan.
What is my loan interest rate?
One of the most important questions to know your interest rate. You’re more than likely going to be paying this rate back for a long time, so making sure you obtain the best rate is very important. While some loans are an adjusted rate (mortgage rates change through the course of the loan), most will be fixed rate mortgage (mortgage rates remain the same through the course of the loan).
What will my monthly loan payment be?
Knowing your monthly payment is essential and sometimes working backwards from this question is best. Many times consumers qualify for substantially more than they are comfortable paying. Knowing your sweet spot upfront is very important.
Do I have to pay Mortgage Insurance (MI)?
Most loans come with mortgage insurance that protects the lender if the buyer happens to default on their payments. While it is necessary on the majority of loans, it can be costly. If you do have to pay mortgage insurance, a good follow up question would be if the MI lasts for the life of the loan. Some loans have mortgage insurance upfront that drops off after a set amount of years, lowering your monthly payment.
What other costs will I be responsible for at closing?
Lenders many items in order to close a loan. You will need to pay an appraisal fee, a title search and property taxes among other things. While you will be given a closing disclosure (CD) before your loan closes, but the sooner that you are aware of other costs the better you can be prepared to pay for them.
How long have you been in the business?
Your lender is an important factor in your homebuying experience, so don’t be shy about wanting to pick the right one. While length of time in a profession doesn’t necessarily qualify anyone, you probably wouldn’t want someone handling your mortgage deal that has been in the industry for 3 days.
How much down payment will I need?
Nearly all loans require some sort of down payment. Knowing how much you will need to obtain the loan is important when planning timeframes to purchase a house. If you need 5% down (5% of the total loan amount) and will need 6 months to save that amount of money, then there is no need to set an unrealistic time line of 3 months.
Oftentimes, the better question is how much down payment can I afford? There are all sorts of loan programs out there and being aware of how much you need to save helps generate a realistic time frame for purchasing a home.
Are you in contact with your homebuyers?
Not all lenders will treat you the same. How accessible is your mortgage lender? In a hot housing market, having an accessible local lender can be the difference between getting a house under contract or losing it to a competitor who can act quicker.
What are your lender fees?
While all lenders will have fees, they are all different. Being aware of what your lender is charging you to originate your loan is clearly important.
Do you trust your lender?
This is not a question to ask your lender, but to ask yourself. The most important part of getting a loan is trusting that the person you’re using is working in your best interest. Obtaining loans is a complicated and rigorous process. For the best results, you have to trust your loan officer.
Determining the most important questions to ask your lender will be based on what you are ultimately looking for in a loan. Would you prefer to out no money down or have the lowest rate? Setting your own set of goals is ultimately the decider of what type of loan you will obtain.