Mortgages are complicated, and it’s important that all of your questions are answered in a way that’s clear and concise. Your mortgage lender or broker is there for you when you have a question, but what happens when you don’t know what to ask? We’ve got you covered! Here are the most important questions you can possibly ask your mortgage professional.
How Does a Mortgage Work?
This sounds like an obvious question – but do you really know? And if you think you know, are you sure you’re right? It’s important that you don’t just know the general concept of how a mortgage works, but also the smaller details of it, such as what documents you can expect to have to offer and what APR is.
What Types of Loans Do I Qualify For, and Which is Right For Me?
You may qualify for more than one type of loan, and you need to know all the details of each one – even the most minute fine print! You need to know whether the rates of each are fixed or adjustable, as well as the interest rate, term lengths, and more for each loan type. You may qualify for a special type of loan, such as one that is government backed or one that is specially designed for those with credit troubles or low down payment savings.
What Does My Monthly Mortgage Payment Include?
There’s more to it than just the repayment of principal and interest! If you put down less than 20% on your down payment, you are required to pay what is called “Private Mortgage Insurance”. What you pay monthly will also differ if you have an escrow account for your taxes and insurance or not. At minimum, your monthly payment will include principal and interest, but there are other factors you must consider. Your mortgage professional will be able to lay everything out for you.
Is Down Payment Assistance Available?
If you want to avoid being forced to pay Private Mortgage Insurance, but weren’t able to gather up 20% to put down, you can ask about down payment assistance. Some lenders accept down payment grants, and if you need them, it’s worth asking about. If you don’t know who to contact about down payment assistance, your mortgage professionals should be able to guide you towards where you can find the grants.
What is the Loan Estimate?
You are required to receive a document from your potential mortgage lender within three business days of your completed loan application submission that states a breakdown of the costs associated with your loan, including closing costs. This breakdown is just an estimate, but it will give you a better idea of what to expect. Don’t be intimidated about asking the lender to clarify certain expected charges, or to further break down your loan estimate.
Do You Offer Rate Locks?
Rate locks can be a great thing during the mortgage loan process. Rate locks allow you to “freeze” or “lock in” your interest rate for a period of time before closing, so you can protect yourself from market fluctuations. Rate locks are commonly offered, but there are only certain times that you are allowed to use them. Some lenders allow rates to be locked for up to 90 days, and some only allow rates to be locked for up to 30 days. Also consider that most lenders will rate match – if, after the rate lock period is over, market rate on interest has gone down, so too will your rate. If the market rate on interest has risen, your rate will not also rise.
Do You Handle Underwriting In-House?
When you have sent in all of your loan application information and relevant documents, the underwriter will verify that information and make sure you qualify for the loan you are asking for. Sometimes, mortgage lenders work in the same office as their underwriter. This is not a requirement, but it can make the loan process proceed faster if everything is handled in house. You can also ask what to expect during the underwriting process, whether the underwriting is handled in house or out of house.
What is Your Loan Processing Time?
Some lenders have a goal time that they aim to process loans in. Others will tell you that it takes as long as it takes. Either way, it’s worth asking! Depending on which loan type you need and how much assistance you’ve taken out, as well as how ready you were to take out a loan, your processing time could take longer or not long at all. Once your mortgage professionals have the information they need, it’s fair to ask how long they expect the loan to take to process. From the mortgage lender’s point of view, they want to process your loan as quickly as possible, enabling them to be able to move onto helping the next borrower – so that is in your favor!
What Happens if my Appraisal Comes in Low?
You should know what to expect if your appraisal comes in low. A low appraisal can affect how much a mortgage company is willing to loan you and how much you are going to have to pay all by yourself, on top of your down payment. For example, if the home you want is being sold for $100,000 but the appraisal only totaled $75,000 it is likely that your mortgage lender is only going to loan you the $75,000 and the other $25,000 is on you to come up with. In this case, you can usually renegotiate with the seller to try and close the cap between selling price and appraisal price.
Will You Sell My Loan?
We bet you didn’t know that this was possible. Sometimes nowadays, it’s almost expected. The answer to this is likely yes, and it may not be a bad thing for you. In the old days, you would stick with the same lender over the life of your loan. Now, your original lender may sell your loan to a major mortgage investor. However, this doesn’t mean that your connection to your original lender has been severed. Knowing your loan’s new manager is important, though, because if you ever need payment delay or assistance, you’ll have to call them instead.
What Do I Need to Prepare for Closing Time?
This is important – You don’t want to mess things up during closing time when you’re almost home-free, so make sure that you are perfectly clear on what to expect from and what to have prepared for closing time. Sometimes you are only required to bring your cashier’s check for closing costs and your government issued identification, but other times there are certain miscellaneous things you must have with you.
Will You Communicate With Me After Closing?
Another important question is how often you can expect to communicate with your mortgage lender after closing time. They should still be willing to check in with you and make sure you’re doing well financially after you obtain your mortgage and move into your new home – typically two or three times per year over the life of your loan. Communication with your lender after closing allows you to get your questions answered and to make sure your current mortgage is still beneficial to your long term financial goals and dreams.
Are You Doing A Hard or Soft Credit Check?
The short of it is that a “soft” credit check does not show up on your credit history, but a “hard” credit check will. You have the right to know when a hard credit check is going to be performed on you, and it must happen when you are getting a mortgage. Lenders need to do a hard credit check to give a more firm interest rate quote. If you’re shopping with more than one lender, try to time everything so that these hard credit checks happen all around the same time – within about a week or so total – so that the impact on your credit score is smaller.
The amount of these questions may seem staggering, but you have the right to answers – especially when you’re signing up for the biggest financial agreement of your entire life. Don’t worry, your mortgage professionals are happy to answer every question you have. That’s part of their jobs! It is your responsibility to make sure you know all of the details as far as your mortgage goes – try to become as educated as the mortgage professionals themselves! It can save you a lot of pain and stress later, because you are now stuck in an issue that could have been avoided if you had just asked for some clarification before closing time. If you were stumped on what is appropriate to ask your mortgage professionals, hopefully this condensed list helps, but remember that this is not a complete list of what you should ask. Do your research to make sure there is nothing else you need an explanation for!