March 12th, 2019 2:01 PM by Jackie A. Graves, President
are the best questions to ask a mortgage lender before you lock in a home loan?
If you want to find the very best mortgage for your needs, it pays to not automatically go
with the very first lender you see.
“You need to
shop around to make sure you’re getting the best interest rate and loan terms,”
Yee, supervising broker at Frankly Realtors, in Vienna, VA, who
recommends that home buyers meet with at least three lenders before they pick.
So how do you
compare and contrast your options effectively? Ask these 10 questions below to
get a sense of who's right for you.
offer a wide range of mortgage products, while others specialize in only one or
two types of home loans. Finding a lender that offers the type of mortgage you
need is a must. These are the most common types of home mortgages:
loan: True to its name, a fixed-rate mortgage means
that the interest rate you pay remains fixed at the same level throughout the
life of your loan (typically 15 or 30 years).
mortgage (ARM): An ARM offers a low
interest rate for an introductory period. After that period—typically two to
five years—the rate becomes adjustable up to a certain limit, depending on
loan: Geared toward low-income home buyers, a Federal Housing Administration loan lets
borrowers put down as little as 3% on a house.
loan: If you or your spouse serve or served in the military, you
may qualify for a Veterans Affairs loan. Under this program, the
VA guarantees the loan—reducing the risk to the lender—and allows you to
finance up to 100% of the house's cost, so you won't have to come up with any
money for a down payment.
loan: Another type of government-backed mortgage, this loan is
offered by the U.S. Department of Agriculture Rural Development in towns with
populations of 10,000 or less. USDA loan borrowerscan
have down payments as low as 0%.
loan: If you live in a pricey housing market, you may end up
with a jumbo loan—a mortgage
that's above the limits for government-sponsored loans. In most parts of the
country, that means loans over $417,000; in areas where the cost of living is
extremely high (e.g., Manhattan and San Francisco), the threshold jumps to
lender should be able to answer this question once you’ve completed a loan application and
the lender takes stock of your employment, income, assets, credit, debt,
expenses, down payment, and other information about your finances.
buyers, closing costs—the fees
paid to a lender and other third parties that help facilitate the sale of a
home—typically run about 3% to 4% of a home’s sales price. So on a $250,000
home, your closing costs as a buyer would amount from $7,500 to $10,000. The
good news is some closing costs are negotiable: attorney fees, commission
rates, recording costs, and messenger fees.
Your best approach is to submit loan
applications with several lenders so that you can receive good-faith
estimates (GFEs), which
contain an itemized list of a lender’s closing fees.
study found that closing times take, on average, 50 days. But, if you’re buying in a hot housing market,
you may need to find a lender who can turn around a mortgage quickly—30 days or
Some types of loans often take longer to process. The entire FHA loan process,
for example, may take 30 to 60 days from the time you apply for the loan to the
day you close, since the house must pass an inspection conducted by the U.S.
Department of Housing and Urban Development. And if the house requires certain
repairs in order to pass inspection, they must be completed before the sale can
in which mortgage lenders verify your assets to get a home loan, check your
credit score, and review your home appraisal—can last as little as two to three
days, but typically takes over a week to finish. All loans must go through
underwriting before the lender can issue you the funds for a home purchase.
do underwriting in-house, while others farm out to third-party underwriters.
Though there are plenty of good lenders that outsource their underwriting,
finding lenders that do theirs in-house could help speed up the process, since
the underwriter would have direct access to your loan officer. (Communication
between a loan officer and an outside underwriter might take longer.)
income and assets, personal identification, and information about your credit
history are the big three. It can be a lot of paperwork, so start now by getting your paperwork in order.
making a down payment? There are many down payment assistance programs across
the country which can help. One study found that buyers who use down payment
assistance programs save an average of $17,766. The challenge, though, is not
all mortgage lenders participate in these programs—but if you need down payment
assistance to buy a house, you’ll need to find a lender that does.
A mortgage rate lock is
a commitment by a lender to give you a home loan at a specific interest rate,
provided you close on your home in a certain period of time. This rate lock
offers protection against fluctuating interest rates—useful considering that
even a quarter of a percentage point can take a huge bite out of your housing
budget over time.
will offer a 30-day rate lock at no charge to you, but some lenders do charge
for rate locks. This fee can be as high as 1% of your total loan amount. On a
$300,000 mortgage, that means paying up to $3,000 to secure your rate—that’s
not chump change.
have to leave the selection of the title company up to
the lender. See how much your mortgage lender’s recommendation will cost, then shop around and see
if you can save any money.
You can do
the same for an escrow agency and attorney.
mortgage lender will stay in close contact with you, giving you updates on key
steps in the mortgage
approval process (e.g., the home appraisal and underwriting),
says Yee. Additionally, you want to find a lender that you could reach easily
when you have questions. Some loan officers work only during regular business
hours, Monday through Friday, which can be a big disadvantage if you need help
on a weekend.
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