Buying a home? Here are 7 questions to ask a mortgage lender to ensure you’re getting all the financial information you need.

Sourced from: www.fatherly.com

Buying a home can be complicated, to say the least.  Understanding the financial aspect can be overwhelming and unless you work in the financial industry, it can be full of confusing terms and figures.  Hopefully you find a mortgage broker who can walk you through the details, but keep in mind, that mortgage brokers are in the business to make money!  Be wise, and enter the conversation with some smart questions and you’ll come off as savvy and prepared… even if that’s not quite how you feel inside.

Here is a list of seven questions that you should ask your mortgage broker before getting too far along in the process of buying a house.

1. “What will the total housing payment be?”

In addition to your monthly mortgage payment, you’ll also need to be prepared to pay other inevitable/required expenses that come with home ownership, such as property taxes, homeowner’s insurance, and HOA fees.  Make sure you know the total monthly amount you’ll be spending on your housing to make sure that it is still affordable and to reduce the risk of defaulting on your loan.

2. “What’s my rate and how long is it good for?”

It’s a good idea to talk to multiple lenders and banks to make sure you’re getting the best rate out there.  But in addition to “shopping around,” make sure you find out how long your rate quote is good for (the lock period).  Once you find a rate you’re happy with, make sure your lender locks in the rate and tells you how long you have before the lock expires.  That way even if interest rates rise, you’ll be locked in to the lower rate.

3. “Do you charge any lender fees or points?”

Fees are abundant when purchasing a home: title fees, loan processing fees, underwriting fees, recording fees, and loan origination fees.  You may find you’re able to negotiate some fo these fees down, such as the loan origination fee.  You will also want to know if your lender will charge any points.  Points are equal to one percent of the home price and typically are used to give you a lower interest rate.  Just make sure you factor that expense in when you’re comparing offers.

4. “What type of mortgage is best for me?”

Don’t assume that the standard 30-year fixed is the best or only option for you.  The 5-year ARM (Adjustable Rate Mortgage) may be a better option if you don’t plan on keeping the house for a long time.  Keep in mind that there are hundreds of options out there, simply because there is no one-size-fits-all solution to mortgages.  Weight the pros and cons of each, depending on your personal situation.

5. “How much do I need to put down?”

This is another factor that varies from person to person, depending on situation.  Your lender should be give able to give you different options based on different amounts put down.  Find out exactly how much you need to pay upfront (including closing costs, taxes, insurance,) and factor those in to your upfront costs.

6. “Why do mortgages get declined?”

It does happen that mortgages get declined, and it can be for multiple reasons.  Ask your lender what some common reasons might be, so that you can avoid them.  Some lenders will require you keep a certain debt-to-asset ratio, have a certain number of years of employment with the same employer, or require a minimum credit score.  These can usually be accommodated one way or another, but best to know about any potential issues upfront so you are not disappointed at the finish line.

7. “How long will the process take?”

This is an important question to ask so that you and your lender on the same page.  Home purchase contracts usually specify how long the closing will be, and contingencies need to be lifted within a certain period of time as well.  Avoid falling out of contract by working with an efficient lender who sticks to the agreed upon timeline.

Buying a home is most likely the largest purchase you’ll ever make.  Do yourself a favor and shop your mortgage around to make sure you’re getting the best overall value.  Coming to the table with a prepared list of smart questions will open the lines of communication with your lender and sets the stage for a successful close.