9 Questions to Ask Mortgage Lenders
Like other investments, buying a home is one of the most significant financial decisions you’ll make. The process involves a large amount of money, meaning unless you properly plan, buying a house can be more challenging and expensive than you can imagine. Consider working with a trusted mortgage company to make the process effortless and find a place within your budget. Doing this helps you understand the Dos and Don’ts of buying a home. Professionals will also guide you and help you select a house worthy of your needs. Additionally, to enjoy a better house buying experience, ask the following questions.
What is the interest rate for buying a particular home?
Asking about the interest rates helps you understand the amount to expect. Doing this also prevents brokers from giving you expensive rates instead of the right amount for the house you want. Therefore, ask and let your brokers give you the expected amount of interest with the loan terms plus the mortgage balance. Also, knowing the interest rates helps you understand the expected monthly payments. Ask for the breakdown of these interests and find out how they impact the amount you pay monthly. Again, know that the lower the rates you get, the lower the monthly payment fees you pay.
Which is the best loan for buying a home?
Because mortgage loans are of many types, ask about the best that fits your needs. Work with trustworthy lenders that lay down all the loan options for you to pick the best. Ask about each loan type and take time to understand their needs. Gather enough information before you settle for any loan type. Ask about how each loan differs from one another and know their advantages and disadvantages. Once you inspect and determine what’s best for you, your home buying experience will be enjoyable and within your budget.
Ask about the discount points and their origination fees
For most lenders, you’ll experience buying a home with discount points and origination charges. Each of these points is equivalent to a certain percentage of the total loan amount you pay. Therefore, ask about these points and the origination charges you should have. Afterward, calculate how much you need and how much the points represent as a percentage of what you have. Also, knowing about the number of points you qualify for helps reduce the mortgage loan interest rate. As such, the more mortgage points you have, the lower your loan’s interest rates.
Ask about the closing costs
As a borrower, you’ll need to pay fees for the services you get from your mortgage lender. Ask about these costs to help you estimate what you’re expected to pay, especially within the specified time after submitting your loan application.
Ask about the loan’s prepayment penalties
Based on your lender’s working rules and regulations, ask about any prepayment penalties to help you prepare for them, especially in the event of financial difficulties. Ask to know if you can pay your mortgage in advance or earlier based on your budget and if you can accommodate what your lender wants. Also, if, for instance, you wish to pay off your mortgage earlier than the specified time, ask when you can begin the process. On the other hand, if you fail to pay on time, ask about the penalties you’ll face.
Ask about the locking of interests rates and how much it will cost you
Locking of interest rates is because they are subject to change, especially when there are market fluctuations when you apply for a mortgage loan. Therefore, ask about this to avoid getting caught in high rate situations. Once you ask about the current rate situation based on the market condition, you can lock them in for a specified period. However, to close the rates when they are high, you’ll pay a certain fee which you also need to ask about.
Ask about the minimum down payment for the loan
Like other financial dealings, mortgage loans require different amounts of down payments. Ask about the percentage of the total amount your lender needs as a down payment. Mostly, you’ll need to pay about 20% of the total amount. However, after asking the percentage spent as a down payment, understand that the more you’ll pay, the better interest rates you get.
Ask about the documents demanded
Based on the rules and regulations of your lender and the budget of the home you’re buying, you’ll need documents such as tax returns and bank statements. You’ll also need to submit paperwork for your recent pay stubs and submission of proof of assets. Still, to avoid any confusion, ask about all the required paperwork.
Ask about how long the approval takes
Based on the urgency of buying your home, ask how long the approval takes and when you’ll have your home. Know if you’ll have a week or two or even a month to submit your documents for getting your home and also to help plan where you’d stay for the time before getting your own house.