Throughout the mortgage process, you’ll come across many different people, each with a unique role. One of them is the loan officer, who serves as the primary point of contact for your mortgage lender.
They will walk you through every step of the home loan process, from applying and submitting financial documents to closing on your home purchase, and even repaying the mortgage. But before you ever sign on the dotted line and buy your dream home, there are a few things you must ask.
Here are 10 questions to ask your loan officer from the get-go to ensure the best experience.
1. Which Loan Types Are Available?
There are many different types of mortgages; offering various interest rates, down payment, and repayment options. Though you may not be sure which one you need just yet, it’s smart to find out the types that a mortgage lender even offers.
These could include:
- Conventional mortgages
- FHA (government-backed) or VA (military) loans
- Fixed interest rates
- Adjustable rate mortgages (ARMs)
- Or even non-conventional loans
Take some time to find out what you need, and ensure your lender offers the mortgage type that best fits your personal situation before moving forward.
2. Will This Be a Hard Credit Pull?
Many lenders will let you begin the mortgage shopping process with a soft credit inquiry. From this, they can give you a pre-approval until you find your home and are ready to process the loan. However, some lenders will conduct a hard inquiry from the jump. If you’re not prepared (or don’t choose them to be your lender in the end), this could negatively impact your credit score.
3. How Much Can I Borrow?
This is the amount of money that a mortgage lender is willing to loan you for your new home (and is different from what you can actually afford). It is contingent on a number of factors, including your income and credit history.
4. What Is My Down Payment?
The amount a lender requires down depends on the types of loans they offer as well as your personal qualifications (such as your credit score and income). Traditionally, down payments have been 20 percent of a home’s purchase price; today, however, you can find mortgages offering no-down-payment loans (though they’re more rare) or loans with as little as 3 percent. Also keep in mind that a lower down payment is often accompanied by a higher interest rate and private mortgage insurance, or PMI- which increases your monthly payment.
5. What Is My Interest Rate?
Your mortgage’s final interest rate will be calculated based on the size of your loan, your credit history, the down payment you’ll make, and even the type of mortgage loan you need. Rates can be fixed or adjustable (some lenders offer both), and you may even be able to buy points in order to lower the rate further.
6. Are Points Included In My Rate?
If you want to lower your interest rate, you may be able to buy points. This will reduce your rate by a fraction of a percent, and can save you quite a bit over the years. Some lenders include points in the rates they first quote you. Be sure to ask if points are added to your initial offer, or if they are available for purchase.
7. How Much Are Origination Fees?
Loan origination fees are common, and cover the cost of the lender processing your loan application. They are usually charged upfront. While fees vary, you can expect them to be between 0.5 percent and 1 percent of the loan total.
8. What Are My Closing Costs?
Fees charged at your new home’s closing (aptly named closing costs) vary. They include things like appraisals, insurance premiums, attorney fees, inspections, escrow fees, recording fees, taxes, etc. Your lender may not be able to give you an exact dollar amount from day one, but they can give you an idea of the standard fees they charge.
9. Are There Prepayment Penalties?
Down the line, you may decide to pay a little extra on your mortgage or pay it off early altogether. If there are prepayment penalties built into your loan, this could wind up costing you quite a bit in fees. Be sure to ask if your specific loan will incur penalty fees if you prepay.
10. How Long Will It Take to Close?
Closing on a home involves many moving pieces, so this isn’t entirely in your lender’s hands. However, they can tell you how long they typically take to fund a mortgage loan. This is one of the most common reasons for a missed closing date, so finding a lender who can guarantee an on-time closing (at least, from their end), saves you from stress and frustration.
You’ll have many questions throughout the home-buying process. By asking your loan officer these 10 questions on day one, though, you’ll be sure to avoid many mistakes and pitfalls along the way.
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