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10 Questions to Ask Your Mortgage Lender Before Closing

January 8th, 2021 8:12 PM by Jackie A. Graves, President

Buying a home is a big investment, so before you close on your new mortgage or mortgage refinance, it’s important to ask your lender these top 10 questions so you can make the best financial decision possible.

Purchasing a new home is exciting, but it's easy to lose sight of the top questions to ask your lender before closing on your loan. It’s important to do your research and get as much information as possible before applying for a new mortgage or refinancing your mortgage so you can make the best possible financial decision. 

Before you do anything with a mortgage loan, it is always a good idea to visit a multi-lender site like ChangeMyRate.com to compare mortgage lenders and see what kind of mortgage rates are currently available. See if you qualify for a low rate today

What questions should I ask before closing on a house? 

Explore the 10 most important questions you should ask a mortgage lender before committing to a home loan.

  1. What type of mortgages do you offer and which do I qualify for?
  2. What will my interest rate and APR be?
  3. How long will it take to apply for and close on my home loan?
  4. What are loan discount points?
  5. What fees will I pay?
  6. Will my rate change over the life of the loan? 
  7. Can I get a rate lock on my mortgage?
  8. Can you estimate my monthly payments?
  9. Will I pay private mortgage insurance (PMI?)?
  10. Will I pay any prepayment penalties on this loan?

1. What type of mortgages do you offer and which do I qualify for? 

Once your lender has reviewed your credit and you’ve determined a budget and down payment, you’ll have a better idea of the type of mortgage loan that best fits your needs. You have several choices:

  • Conventional mortgage loans: these are not insured by the federal government. 
  • Fixed-rate mortgages: the rate stays the same over the term of your loan.
  • Adjustable-rate mortgages: these have fluctuating interest rates that go up or down based on market conditions.
  • Government-insured mortgages: these are FHA, USDA, and VA loans
  • Jumbo mortgages: loans that have non-conforming loan limits, which means they exceed the limits set by Freddie Mac and Fannie Mae. 

2. What will my interest rate and APR be?

The interest rate or annual percentage rate (APR) you qualify for is typically based on your credit score and credit history. Some lenders will also look at your employment history, income, debt-to-income ratio and other factors to determine what rate you qualify for. Generally, you will get a better rate if you have a higher credit score.

It’s crucial to work to qualify for the lowest mortgage rates possible. With ChangeMyRate.com, you can find out your rate and estimated monthly payment within minutes. Plus, it's free!

3. How long will it take to apply for and close on my home loan?

The average time from application to the time of closing can take between 48 to 51 days, according to Realtor Magazine. That’s up four days since this past October when the “Know Before You Owe" mortgage disclosure rules took effect.

In a report, Ellie Mae breaks down the average time to close by type of loan:

  • 49 days: Conventional loans 
  • 51 days: Purchase loans 
  • 48 days: Refinance loans 
  • 51 days: Federal Housing Administration (FHA) loans
  • 53 days: Department of Veteran Affairs (VA) loans 

4. What are loan discount points?

With loan discounts or mortgage points, you pay more upfront in exchange for a lower interest rate on your loan. A fee of 1% of the mortgage loan amount equals one discount point, which typically results in a 0.25% cut in your interest rate.

 Paying discount points, or “paying down the rate,” is a good option if you plan to keep your mortgage beyond the break-even point — or when the accrued monthly savings equal the upfront (points) fee.

Mortgage rates have again dropped to new lows for the 13th time this year.

Current rates as of Dec. 24:

  • 30-Year Fixed-Rate Mortgage — 2.66%
  • 15-Year Fixed-Rate Mortgage — 2.19%
  • 5/1-Year Adjustable-Rate Mortgage (ARM) — 2.79% 

 ChangeMyRate.com can walk you through the home buying process — use their free tools to browse different types of mortgage loans and see how much home you can afford. You can get pre-approved for a home line within three minutes.

5. What fees will I pay?

The cost of a loan includes lender fees, as well as related third-party vendor fees—including appraisals, credit reports, the title policy, pest inspection reports, escrow where applicable, recording fees, and taxes. An estimate of these fees should be accurately included in a document called the Loan Estimate, which federal law requires that the broker gives to you.

Lenders are required to deliver the Loan Estimate when an application has been completed, and it should include the name of the borrower, their Social Security number, the property address, an estimated value of the property, the loan amount, and the borrower's income. You should ask for an estimate of these costs upfront, however, before you apply for the loan.

6. Will my rate change over the life of the loan?  

If you have an adjustable-rate mortgage, your interest rate can change over the life of your loan. Even if you have a fixed-rate mortgage, your payments can go up or down if you pay your insurance through an escrow account and if your insurance payment rises or falls.

Also, if your property taxes change, the escrow portion of your monthly payments can change too. Or, if you pay mortgage insurance, once you’re able to cancel the insurance, your payment will change.

7. Can I get a "rate lock" on my mortgage? 

A "rate lock" on your mortgage, also called rate protection, allows you to “lock-in” your interest rate for a specific time period — usually 15 to 60 days. This means until you close on your mortgage, your rate will not increase. No matter what happens in the market, even if interest rates take a 4% jump, your interest rate will not change and will be honored by your lender.

 If you're looking to secure a low rate today, then visit ChangeMyRate.com to see what mortgage lenders are currently offering and what kind of rates you'd qualify for with your current financial situation.

8. Can you estimate my monthly payments?

Your mortgage lender may be able to estimate your monthly payments, but usually not until they run the numbers and pre-qualify you for a loan. However, you can also use an online mortgage calculator to determine potential monthly payments. A mortgage calculator can give you a complete cost breakdown, including principal and interest, property taxes, insurance and mortgage insurance (if you make less than a 20% downpayment).

9. Will I pay private mortgage insurance (PMI)?

Whether you pay private mortgage insurance (PMI) varies from one lender to the next. PMI is used to off-set the lender’s risk and is typically charged if you put less than 20% down when purchasing your home.

PMI is typically paid monthly as part of the monthly mortgage payment. But it can also be paid as a one-time upfront premium at the time of closing. It’s difficult to pinpoint how much PMI will cost, but you can estimate about .5% to 1% of your loan amount annually. And, PMI doesn't last forever. When your loan balance is 78% of the original cost of your home, your lender must drop PMI.

Not sure you’ll pay PMI? Visit ChangeMyRate.com to get in touch with experienced loan officers and get their mortgage questions answered.

10. Will I pay any prepayment penalties on this loan?

Some lenders will charge a prepayment penalty if you pay off your loan before the end of your term. It’s likely your loan agreement spells out if and when the penalty applies. If your lender charges a prepayment penalty, it’s usually only within the first three to five years of the loan.

Closing on a new mortgage or have questions about refinancing your current mortgage? Visit ChangeMyRate.com to get personalized rates and preapproval letters without affecting your credit score. 

To view the original article, click here 

Posted by Jackie A. Graves, President on January 8th, 2021 8:12 PM

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