Important Questions To Ask A Mortgage Lender on February 18, 2021 Signing on the dotted line for your first mortgage agreement can sometimes be intimidating. There are some questions to ask a mortgage lender that you need to be aware of so that you’re fully informed on everything that the mortgage entails. Mortgage rates are one of the mortgage questions that should be on your list of things to ask. When it comes to mortgage lender questions, there is no dumb question. Home investment is one of the biggest purchases that people typically make in their lives, so it makes sense to want to understand it. If you’re confused in any way about your mortgage, Mortgage Assist contains a full team of dedicated agents that can help you along the way to securing your first mortgage. Many people simply don’t understand or know what it takes to progress towards the path to owning a home. The mortgage assistance program is built for people such as these. Not everyone was graced with a life where they were able to keep up a perfect credit rating. If you’re in that boat, then Mortgage Assist is the place to consult with. When most people go to purchase a car, they want to learn everything they can about the car. They want to know if it has all-wheel-drive, how much horsepower it has, the technology features, and so on. A mortgage should be treated the same way. For such a large chunk of money coming out of your monthly salary, it’s best to know what to ask a mortgage lender when it comes time to visit with one. Here is a list of mortgage questions that you should keep in mind when speaking with your lender: What Does The Mortgage Process Look Like? If you can’t currently afford a car with cash, you take out a loan or get financing. A mortgage is the same thing. It is a loan used to buy your home. For those that want to take advantage of home financing, you can get some decent benefits and turn it into money. As you’re going through the process, asking home loan questions, and doing your research, you’ll take note that there are two important documents that you’ll have to sign off on. A promissory note is the first one and this document contains all of the details regarding the repayment terms of the mortgage agreement. It will show how much money you’ll be paying per month, and how many months are included in the term. When you sign off on it, you’re basically promising that you’ll pay the entirety of the loan back. The mortgage is the second document you’ll sign off on. All of the important financial details will be included in the mortgage. You’ll also notice information regarding the penalties if you don’t make mortgage payments. If you aren’t able to make mortgage payments for any reason, the lender could potentially take possession of your house. After the house is paid in full, there would be a lien on the house that can then be taken off. How Many Different Loans Are Available? This is another thing that should be on your list of questions to ask your mortgage lender. There are a wide variety of different mortgage loans that are available to people. You’ll typically hear your mortgage lender talking about a fixed-rate mortgage and a variable-rate mortgage. There is also a large selection of different terms that you can get a loan for. If you decide that you want to go with a long-term mortgage, then you’ll be paying a lesser amount every month, but the downside to that is that there will be more interest involved than a loan that is on a shorter term. If you’re going with a conventional loan, you’ll typically need a good credit score in comparison to some of the other loans being offered. If you’re able to put down enough money, you could potentially avoid having to get mortgage insurance. Your credit score is taken into account when you’re looking to secure a loan for a home, and this could reflect how good of a loan you’ll be able to get. With all of the many different types of loans, this is one part of the process that you’ll want to spend some time on. After you’ve visited your mortgage lender, you might even want to take some time for yourself to review all of the different options that were discussed. Getting the right loan on the right terms will have to align with many things in your current financial situation. What Is The Process For Qualifying For A Mortgage? There are a bunch of different things that mortgage lenders look at when approving people for loans. They’ll look at your income, assets, any property that you own, and your credit rating. The lender will do an inquiry to get your credit report and then analyze the credit score to see if there are any debts on it. The lowest median score is the main thing that lenders are keeping an eye on, and this is because past behavior is usually a good predictor of future behavior. If your credit score is completely clean and free of any missed payments or inability to make payments off on time, then there is a higher chance that you’ll qualify for a mortgage that contains better terms. Lenders usually have a credit score that they use as a baseline for approving mortgages. If you have a credit score of around 620 or higher, then you’ll probably be qualified for a conventional loan. The credit scores may differ from lender to lender, but the broad rule of thumb is that lenders are more willing to approve you for a mortgage if you have a good credit report. If they browse back the last few years and see that you weren’t able to pay off your credit card that has an average monthly balance of $1,200, then that is probably enough proof that you won’t be able to pay off a $1,200/month mortgage on top of that number. When a mortgage lender takes a look at your assets and property, they want to make sure that you have the financial capacity to cover the down payment in full. They might ask you what your purpose is for buying the home. Many people like to purchase homes just to rent out to tenants for income purposes. Others will be purchasing it as a vacation home. Depending on that purpose, the lender will ask if you have reserves. Reserves are the amount of savings you have available in the case that you have no income coming in. Pre-qualified VS Pre-approved – What’s The Difference? There are a lot of lenders that use the terms pre-qualified and pre-approved as if they refer to the same thing. They refer to two different things, and this can create a lot of confusion for those seeking a mortgage for the first time. For pre-qualification, a mortgage lender might not even bother doing an inquiry into your credit report to see how much you could potentially be approved for. But if they do decide to do a credit score inquiry, then all of your previous debts will be seen. When mortgage lenders don’t end up doing an inquiry into your credit report, you’ll want to be upfront with them. Let them know if you’ve ever had an issue making monthly payments on anything. You might be asked for a written statement of your income or assets, as well. Based on all of these things, the lender will then provide you with a number on what you could probably afford. This number is usually just a broad prediction. For a complete pre-approval, the mortgage lender will do the inquiry into your credit score. They will want monthly bank statements, employment pay stubs, and other documentation that show you’re being honest and upfront about your finances. Most real estate agents and people selling homes will opt for this method instead of only just pre-qualification. What Will I Be Able To Afford? Once you’re pre-qualified for a mortgage, you’ll have a better idea of how much of a house you’ll be able to afford. Even though the pre-qualification might state that you can afford a high amount, this doesn’t all of a sudden mean you should go and purchase a house at the pinnacle of the budget range. Doing that would be unwise because certain things in life happen out of the blue that no one can expect. If an emergency arises and you have a massive income loss, then the big monthly payments could be more difficult to afford. Going for a happy medium is probably the best approach. This will allow you to still have some money left over for extracurricular things you enjoy. When a monthly mortgage payment completely maxes out your monthly income, then you’ll have nothing left at the end of the month. Getting approved for a mortgage is a step in the right direction towards your new home. Before you dive into all of the real estate sales that you can get your hands-on, you’ll first want to consider your budget and what monthly payments you’ll feel the best with. The mortgage payment isn’t the only thing you need to consider when owning a home. Most people also typically like to keep anywhere from 1% or 2% of the entire purchase price of the home for additional maintenance. For those that want a ballpark estimate on mortgage budgeting, usually, you don’t want to use anywhere over 33% of your earnings for your mortgage. If you are using over that amount, then that could be flexing your budget to a point that might end up a little out of your comfort zone. What Amount Is Best For A Down Payment? A mortgage lender might let you know that there are a couple of different approaches for your best down payment. There is a baseline down payment of what you’re required to pay, and there is also a down payment that will work best for your current finances. If you’re able to afford a higher down payment without any financial stress, then the lender might tell you that it would be great to put more down. With a higher down payment, you could potentially have to deal with lower monthly interest rates. In addition, a larger chunk of your home will be paid off sooner. So, if you’re in a financial situation where you can afford a high down payment without breaking the bank, it’s ideal to consider it. But before you go ahead and drop a massive down payment, do some budgetary analysis on all of the factors involved. What Do Mortgage Payments Involve Every Month? This should always be in your list of questions for a mortgage lender because many people think that the mortgage payment is the only thing involved when purchasing a home. There are things like taxes and insurance that also need to be taken into account. Mortgage payments will always include the principal and the interest on every statement that you receive. On top of these payments, you need to keep in mind that the home will probably not be furnished, so that will dig into a chunk of savings, as well. Remember, no question is a bad one when it comes to your finances, let alone anything else in life. In addition to all of the above questions which might be broader, there are also some more specific questions to ask your mortgage lender. What Are The Different Types Of Loans For Homes That You Have Available? After you’ve figured out the loans that you can be approved for, you’ll now want to do some research and take a look around to see what other mortgage lenders offer. Maybe there are some that will have a better deal for you. It doesn’t hurt in comparing mortgage lenders, and the first question to ask is what loans they have available. If you’re looking for a condo, it’s also good to ask the lender if they have certain financing available specifically for that. Everyone comes with different needs for their mortgage, and lenders usually offer a good range of options that will match your situation. Which Type Of Mortgage Should I Go With? When you’re meeting with your mortgage lender with your list of first-time home-buyer questions to ask a lender, you’ll want to keep them informed on your current situation. The mortgage lender will typically show you a list of different options that could potentially fit into your financial situation. You might also want to ask your mortgage lender to highlight the weakness of each option. This will give you a better understanding of seeing if it’ll work for you over the long term. If the lender talks about any additional fees associated with the loan, ask them why. If you don’t feel completely comfortable with the lender, then go somewhere else. There are many lenders out there and you’re bound to find one that works for you. What Will I Have To Pay In Interest? There are two rates to keep a note of when you see lenders displaying their interest rates. Base interest rate is the first one you’ll see and this is directly involved with the interest you’re paying on the mortgage itself. The annual percentage rate is the second interest rate you’ll see and this rate will be higher because it also includes any applicable closing costs that are relevant to the loan. If there is a large difference in the annual percentage rate and the base interest rate, then that will be why the mortgage lender is charging a little more in extra fees. Ensure that you fully understand what the lender is talking about when they are going over these things with you. You won’t want any unwelcome surprises when your monthly statements start rolling around and you see a bunch of extra fees that you didn’t understand. What About The Loan Estimate? The entire breakdown of all of the fees included with your loan is known as the loan estimate. There is usually a standard amount of time where lenders need to provide the loan estimate upon completion of the application. Suppose there is a change along the way that might have an impact on the cost of your mortgage. The lender needs to send you another loan estimate that will reflect the changes. Before completing your mortgage, you should also be getting a disclosure three days before it happens. Mortgage costs shouldn’t be too different from the numbers that the lender gave you. There are certain things like title insurance, appraisal, and other fees that fluctuate the costs by up to 10%. Loan estimates should always have the mortgage terms clearly stated and any other applicable costs. What’s Involved In Underwriting? Underwriting is another important thing to bring up with your lender, and it basically involves verifying all of the documentation that you submitted in being approved for the loan. Does your lender handle any underwriting? What should you expect? These questions need to be asked to streamline the process more simple for yourself. It might seem like a redundant question but ask what the best method of contact is with your lender. Some people like to keep things over email so that they have a digital paper trail of everything that was discussed throughout the entire mortgage application process. Others prefer doing things over the phone. If you do choose the phone method, ensure that you carefully write or type everything down that the lender is saying so you don’t forget right after hanging up. How Long Does It Take To Process The Loan? You’ll want to know how long it takes the lender to process a loan. This is important because if you have your eye on a house that is only receiving offers on a certain date, the time between you making the offer and securing the loan could test your patience in some cases. If you’re only doing refinancing, you can expect this to happen faster because a full appraisal doesn’t typically need to be conducted. A home inspection usually isn’t required for refinancing, either. When people are selling homes, they usually want a buyer to be able to get the financing out of the way as fast as possible. The loan process not only holds up the buyer but also the seller. Most of the time when people are purchasing a home, they will put in the terms that the purchase will be subject to financing. In Terms Of Service Fees, What’s Involved? This is an important question to ask your lender. No one likes surprise fees that they never agreed to. Sometimes lenders will have a fee for using their online services. Sometimes people are charged more money to make the payment online than the actual payment they’re making. Sometimes lenders aren’t even fully aware of the fees themselves. If you speak to a lender and they can’t provide all of the information regarding applicable fees in your loan, then you might want to compare and see if other lenders can provide that. Most people want to see where their money is going, and over the course of a 25-year mortgage, these fees can add up to be quite a large sum of money. After The Mortgage Process Is Complete, Is There Ongoing Communication? You might want to ask your lender if they keep the communication going after the loan is closed. Doing this will give you the chance to be able to ask any questions even after all is said and done. Questions arise all of the time regarding mortgages, and your lender should be there to assist you even though a loan has been closed.