When seeking a mortgage loan, it is a good idea to shop around. It’s generally recommended that you meet with between two and four mortgage lenders (and/or brokers) to get a good idea of which might be best for you. You should also get a feel for what your loan will be like when you speak with a mortgage lender. Here are 10 questions you should ask mortgage lenders as you seek a home loan:
1. Who do you work for? First, find out whom the lender represents, or whether he or she is a broker. This will help you understand the institution that the mortgage lender is associated with.
2. What are your qualifications? Double-check the mortgage lender’s credentials. Make sure you understand the licensing requirements in your state, and do a little research to make sure your mortgage lender is properly accredited. Also check for membership in a professional organization.
3. How are you paid? Find out how the mortgage lender or broker is paid. Many are paid by commission, or charge fees that you may be able to negotiate in order to save a little money.
4. What are the qualifying guidelines for a home mortgage loan? Be sure to find out about what it takes to get the best interest rate on a particular loan with that mortgage lender. You should also understand the down payment requirements and credit score requirements.
5. Is it possible to lock in a rate before closing? Mortgage rates have been rather volatile lately. Find out whether or not the mortgage lender will allow you to lock in a mortgage rate until closing, and if it costs extra to do so. Also, find out if you can pay points to lower the mortgage interest rate.
6. What fees come with this loan? There are a number of fees that come with different mortgage loans. Find out from prospective mortgage lenders what fees they charge, including origination points and fees, loan processing fees, documentation fees, and other closing costs. Ask for full disclosure through a Good Faith Estimate (GFE) and be sure to find out about prepayment penalties. If you can, insist on a mortgage without prepayment penalties.
7. How long will it take to approve the loan? Understand the mortgage lender’s timeframe for home loan approval. Many mortgage loans right now take 45 to 60 days to underwrite and process. This means that your closing date on the home transaction must be after the loan approval goes through. Also ask about pre-qualification or pre-approval, which can give you a jump-start on the home buying process.
8. What documents do I need? You can save time and trouble by finding out exactly what documentation the mortgage lender requires. The more prepared you are, the faster (and smoother) the home buying process will go.
9. Who will service the home loan? Many mortgage lenders sell home loans on the secondary market. Find out whether your loan is likely to be sold, and by whom it is likely to be serviced. Mortgage brokers don’t actually lend money, so make sure you understand who will have your loan if you’re working with a broker.
10. Do I need PMI? Learn about PMI (private mortgage insurance), and find out whether or not you will need it. This is insurance coverage you pay for to protect the mortgage lender from default if you fail to make payments. Most lenders require PMI for down payments below 20% of the home’s sales price.