Mortgage lenders are there to help you as much as they can and meet your needs to the best of their abilities. Knowing what questions to ask will help you decide which lender to choose from.
Which type of mortgage is best for me?
Having a conversation with your lender about your credit score, assets, and the amount you hope to loan, will all help them decide what mortgage will suit you the best. They may recommend a specific loan while they may also give you a variety of options. No matter what they do, it is always a smart idea to compare the pros and cons of the options given. Never be afraid to ask your lender questions. If you don’t understand a price or concept, asking them to explain it will make you feel more comfortable with the whole process — there are no bad questions.
How much down payment will I need?
A down payment is money you pay upfront to the lender when purchasing a loan. Putting down at least 20% on a home can lead you to a mortgage at a better rate since 20% is the amount that most lenders tend to aim for. While the goal is 20%, if you qualify for a conventional loan, down payments can be as low as 3%.
What is my interest rate?
Knowing your interest and annual percentage rate is a key part of a mortgage. The base interest rate is the original rate that you are charged for the mortgage. The annual percentage rate (APR) is an interest rate that is composed of the base interest rate and the closing costs associated with the loan. For example, one lender may offer you a 4.5% APR, and another a 5% APR. The lender offering a 4.5% APR is charging you less than the lender offering a 5% APR. A tip to remember is that the bigger the difference between the base interest rate and the APR, the higher the fee the lender is charging you.
Is there an origination fee?
It is very rare to find a lender that does not have any fees attached to their work. The origination fee is an additional fee that lenders charge to make an additional profit rather than receiving only what the interest rate gives them. Each lender will have a different origination fee, so it is very important to ask this question. These additional fees will be added to the “closing cost,” the cost you pay the lender when the deal closes, meaning that it will affect the calculation of your annual percentage rate (APR).
Can my documents be sent and signed electronically?
The mortgage application is a process that does require a good amount of paperwork. The ability to complete documents virtually is a time saver and stress reliever. When having to sign, documents will not submit until they have been electronically signed, allowing for more accuracy in document completion. Some lenders prefer to use paper documents, so be sure to clarify if you have a preference.
Will you sell my loan?
Selling the loan is more common than one may expect. Some mortgage lenders create the loan and then sell it to other mortgage companies to service the loan. Knowing whether or not your lender plans to sell or service your loan will help you choose the right lender and help prevent problems down the road.