What questions should you be asking your mortgage lender? Today I’ll discuss eight of them.
1. “What type of loan is best?” This depends on your scenario—how long you plan to own the property, if it’s a primary residence you plan to live in for a long time or if you plan to rent it out at some point.
2. “What is the interest rate and annual percentage rate (APR)?” The interest rate is the rate the loan is at, but once you include the cost of obtaining, that is how you get the APR. It’s a better indicator of the overall costs.
3. “What are discount fees and origination points?” This is a percentage of the loan amount, and its often between a quarter of a percent and 1%, depending on the loan amount you obtain. In a way, it’s prepaid interest to buy down your interest rate. It’s also another expense related to your loan, so review it accordingly.
4. “What are all the costs?” There are discount points of origination fees, application fees, appraisal fees, and others besides the costs of general homeownership. Be sure to ask for a detailed list of fees so you can review them and plan accordingly.
5. “What is a loan estimate?” This is a breakdown of all the expenses related to obtaining the loan.
6. “Do you offer rate locks?” Sometimes you can obtain a rate and your lender can lock it for a period of 30 days, which is the average escrow timeline to close. However, they’ll also sometimes float the rate, meaning they can’t lock it until it’s been approaved. This means that if the interest rates go up during that time, you’re at risk.
7. “Do you offer in-house loan approval?” It’s a better experience when they can approve the loan in-house because it’s much faster; they can walk over to an underwriter to review the loan directly at that time.
8. “How long is it going to take to fund the loan?” This is important especially in the case in which you’re purchasing a house and you only have 30 days to accomplish the transaction. If you’re just refinancing and looking to reduce your payments, 60 days is the average time. You will want to review this with your lender to make sure.
If you have any further questions about loans, please feel free to reach out to us. We have access to some of the best loan specialists to help you.