One of the biggest mistakes that many first-time homebuyers make is thinking that the process of getting a mortgage is a simple transaction. Though you can certainly apply for one of these loans online, the truth is that you should ask many questions if you want to ensure that the mortgage you get is the right one for your needs. As such, every good mortgage application process needs to involve a conversation with your lender.
Ten Questions to Ask When Applying for a Mortgage
What Are My Borrowing Limits?
The first question that most borrowers ask is about their limits. While it’s not always the best idea to take out as much money as you can borrow, it is good to know your realistic ceiling is looking for a home. This will not only inform you of your limitations, but it will give you a better idea of the homes for which you can practically consider.
What Kind of Programs Do I Qualify For?
There is more than one kind of mortgage, and many lenders offer several different mortgage services. Depending on your credit and history, you might be able to apply for numerous types of loans. From FHA loans with reduced down payments to VA loans for veterans, some of these special loan programs can not only save you quite a bit of money but can also radically change the questions that you’ll need to ask your lender.
What is the Interest Rate?
One of the most important things you can know about your mortgage is the interest rate. Your interest rate will not only determine how much you pay towards your mortgage each month, but it will also ultimately determine how much you pay for your home. Asking about your interest rate will also allow you to have a conversation about whether you’re looking at a mortgage with a fixed rate or looking at something with an adjustable interest rate. Knowing exactly how much you’re going to pay and how that impacts your home’s price is always a good idea.
How Much Do I Need to Put Down?
One of the biggest obstacles to buying a house is often your down payment. Unfortunately, many borrowers aren’t entirely sure how a down payment works, and they don’t have the information necessary to determine what they need to bring to the table. While your down payment will ultimately impact how much you pay for your home, it is crucial to remember that many special programs can greatly reduce how much money you’ll need to put down to get into the home of your choice.
What Kind of Fees Will I Pay?
There are plenty of costs associated with taking out a mortgage that you might not expect. These costs are generally paid at closing and can easily be equal to the amount of money you need to put down on your home. Talk to your lender to find out about fees like those related to appraisals, your home’s title, and even inspections. You aren’t always required to go with your lender’s partners when it comes to some of these services, so getting their fee estimates can allow you to look for outside professionals that might be able to save you a bit of money at closing.
What Else Am I Paying For?
Discount points and origination fees are both charges with which most consumers are unfamiliar, yet they can both end up costing you more than you imagine. Points will reduce your home’s interest but will cost you about one percent of the loan amount per point. On the other hand, origination fees are charged for processing your application and can run as high as one percent of the cost of your home. Again, these are costs that you need to be prepared for so that you’re not caught without enough money at closing.
Do You Have Pre-Payment Fees?
In reality, the vast majority of lenders will not punish you financially for paying off your loan early. However, those lenders who do still have penalties can charge you up to six months of interest if you pay your home off before the originally agreed upon date. If your lender does have these fees, try to find out more about when they will apply; many lenders who have pre-payment fees only charge them for the first few years of the loan.
When Can I Lock-In?
The interest rate at the time you apply for your loan is unlikely to be the rate when you actually close on your home. Some lenders will offer to let you lock in your rate early, allowing you to gamble a bit on the market. Locking in will allow you to know exactly what you will pay in terms of interest, though any dips in the interest rate will lead to you paying more than you would have if you had paid the rate at the closing date.
How Long Will This Take to Process?
Most loans take somewhere between thirty and sixty days to process. It’s always a good idea to talk to your lender and figure out if any issues might hold up your closing. This is an especially good question if you know that you’re on a tight schedule to close on a property, as even a delay of a few days could have a huge impact on whether or not you can work with a particular lender.
Who Do I Talk To if I Have Questions?
Finally, make sure that you know who to call if you have problems with the loan. If things change with your finances or with the home you want to buy, you’ll almost certainly have questions you need to ask. Knowing that you have a specific person to whom you can speak can be a great way to give you the peace of mind you need.