If you're buying a home for the first time, you might be wondering what questions to ask when talking to a mortgage lender. We've put together 14 essential questions to ask your lender or mortgage broker so you can rest easy knowing you're ready for what lies ahead. A conventional 30-year fixed-rate mortgage loan is the most common type of mortgage loan. Because the term is so long, the monthly payments are lower, and the fact that the rates are fixed means that your interest rate will stay the same for the entire life of the loan.
However, the longer your mortgage term, the more interest you'll pay on the loan. So, if you can afford higher monthly payments, it might be worth choosing a 15- or 20-year term. Mortgage points (sometimes referred to as “discount points”) are an optional charge you can pay at closing to “buy a lower interest rate and save on the total cost of the mortgage loan.” The cost of each mortgage point equals 1% of your total loan. Ask your lender how much income you need to buy a home and what sources of income they consider when calculating your total purchasing power. Finally, ask your lender what documents you need to provide to prove your income, such as W-2 forms, pay stubs, bank account information, and other materials.
You might assume that you need a 20% down payment to buy a home. However, in some cases, you can buy a home with as little as 3% down payment. Certain types of government-backed loans even allow you to get a mortgage with a 0% down payment. The oft-quoted 20% figure has to do with avoiding private mortgage insurance (PMI), which protects the lender if you don't repay the loan. You can cancel the PMI of a conventional loan as soon as you accumulate 20% of equity in your home, and your lender will automatically cancel the PMI as soon as you reach 22% of your home equity.
Closing costs are the processing fees you pay to your lender to pay off your loan. Some typical closing costs include appraisal fees, opening fees, attorney fees, and title insurance. The specific closing costs you'll pay will depend on where you live, the down payment, and the size of your property. Closing costs typically range from 3% to 6% of the total value of your loan.
The 14 questions we just reviewed can serve as a starting point when choosing a mortgage lender. The following questions aren't necessarily what you should ask your potential lender, but they are questions you may still have about the process of finding a mortgage lender. Mortgage insurance is generally required for most loans with a down payment of less than 20%. The type of insurance varies depending on the loan, and the amount you pay may vary depending on the lender. PMI, for example, can cost between 0.5% and 1% per year.
Mortgage Basics: 4-Minute Reading Rocket Mortgage, 1050 Woodward Ave. You may feel bad about your difficulties, but it doesn't help to find a reason why you need help. Clearly explain your situation, including the reasons for your financial difficulties. Lenders appreciate honesty and may be more willing to work with you if you're honest about your circumstances.
Some mortgage brokers work primarily with specific financial institutions and promote lenders with whom they have long-lasting relationships. However, a mortgage broker works with borrowers to help them compare prices and find the right lender for their circumstances. As a result of the services that brokers provide, you pay them a commission, which is a percentage of the final amount of your mortgage. He has been in the mortgage industry since 1986 and has held various positions, including loan processor, loan officer, mortgage broker, branch manager and vice president. Be sure to ask your mortgage lender (or broker) a lot of questions about income requirements, the types of loans you qualify for, and how much you have to save for a down payment and closing costs.
You should be prepared to talk to mortgage executives at different types of institutions, such as a bank, a lender, and a broker. Before getting a loan, you should understand how lenders and mortgage brokers are different, so you know who the help you need is from. Prepayment penalties allow mortgage lenders to recover some of the money they would have earned with your loan if you had continued to make monthly payments until the end of the loan term. Instead of researching different types of loans and lenders independently, mortgage brokers do the work for you.
However, you should also ask your mortgage lender about the annual percentage rate (APR), as it provides information about the total cost of borrowing money. If you don't have anyone to ask, you can also search for lenders through an online search or turn to a mortgage broker. Given the differences in their roles, the questions you would ask a mortgage broker are different from those you would ask a lender.
