What are the right questions to ask a mortgage lender? Remember that your goal is to find out if they’re the right fit for your needs as a homebuyer.
A suitable mortgage lender can help you quickly compare various home loan products, such as:
- FHA loans
- VA loans
- Down payment assistance programs,
and help you find the best mortgage product for your financial situation.
Whether you’re thinking about homeownership, purchasing an investment or vacation property, or refinancing your existing mortgage, a suitable mortgage lender will be your expert.
Your mortgage lender can help you get the best interest rate while being an invaluable guide through the loan application and the mortgage process.
By the end of the conversation, you should have an estimate of how much of a mortgage you can afford and the best loan product options for your situation.
So, what are the top questions to ask a mortgage lender? Let’s take a look.
Before you talk to a mortgage lender
Most Americans have experienced some loan process by the time they are ready to buy a home—whether that’s student loans, a car loan, or debt consolidation to get rid of credit card debt.
But the home loan process is different. To help you get the most out of your conversation with mortgage lenders, consider the following:
- Gather your financial documents such as bank statements and pay stubs, and have ready specific information regarding your income, debt—including credit card debt—and any assets
- Understand different mortgage lenders can have varying interest rates, eligibility requirements, processing timeframes, etc. You might have to speak with multiple lenders to find the best mortgage for your family.
Top questions to ask a mortgage lender
Once you’re prepared to meet with potential lenders, ask each of them the following questions to better understand your own situation and how they can help you.
How much home can I afford?
Figuring out the amount you can realistically afford to spend on a house without being financially overextended requires careful planning and consideration.
Potential buyers should begin their home-buying journey by speaking with a mortgage specialist.
Whether you believe yourself to be a frugal spender or not won’t necessarily affect your eligibility to qualify for your mortgage. Credit reports and your DTI ratio will tell the lender what they need to know to approve you or not.
But your regular spending habits could impact the day-to-day realities of living with a large mortgage.
The best way to understand how much home you can afford, or how much of a loan you may qualify for, is to get a mortgage loan pre-approval. This is a preliminary estimate of how much of a loan you could possibly qualify for, based on your financial circumstances.
What kind of loan should I get?
Understanding the various types of home loans available is crucial to making a sound financial decision.
Your mortgage lender can outline the different home buyer options. These might include:
- Fixed-rate mortgages
- Adjustable-rate mortgages
- Government loan programs
- Federal Housing Administration’s FHA loan program
- Department of Veterans Affairs loan program (available to eligible service members, veterans, and surviving spouses)
It’s important to remember that there’s no one choice that’s right for everyone—you’re unique, and your mortgage application is too.
What kind of mortgage loans do you offer?
Because there are many different types of home loan options, each with its own requirements and rules, it’s essential to learn about the type of products each lender might offer.
Not only do different lenders offer different products, the interest rates, closing costs, and other factors may differ.
For example, aside from conventional mortgage loans, some lenders offer different refinancing options, either through private financing or government-backed refinancing like FHA streamline or VA Irrrl’s.
In addition, some lenders might specialize in just one type of loan. Some lenders will also offer a quicker processing timeframe because of a streamlined or expedited underwriting process.
Make sure you understand whether the lender offers the products and timelines that work the best for you.
What credit and income qualifications do I need?
The credit and income requirements to buy a home can vary depending on any number of factors, such as:
- Your lender
- The home loan product you’re interested in
- The down payment option you choose
For example, FHA home loans are available to home buyers with credit scores of at least 500, provided they have a 10 percent down payment. These loans are a popular choice for many first-time homebuyers.
Other programs and lenders are hesitant to approve home loans for borrowers with credit scores below 600.
When it comes to income, most lenders look at a borrower’s DTI or debt-to-income ratio rather than just how much money they earn. In simplest terms, your DTI is the amount of the gross income you spend repaying debt.
Lenders consider a borrower’s DTI when considering whether someone will be able to repay a mortgage loan.
And while there isn’t a pre-set percentage that will guarantee you’ll qualify for a mortgage, according to the CFPB (Consumer Financial Protection Bureau), a DTI below 43% is considered favorable by most lenders.
But some lenders will approve mortgages with higher ratios. This sort of detail is precisely why it’s essential to ask the right questions.
How much of a down payment do I need?
Generally speaking, a down payment of 20% of the home’s purchase price is ideal, although not a hard requirement for some lenders.
Qualified borrowers can be approved for a conventional loan with down payments as low as 3%, and some, like VA loans, offer zero-down payment loans.
In our case, an Assist Home Loans mortgage agent can easily walk you through the options and choices available.
What’s included in my monthly payment?
Depending on the details of your mortgage, your monthly mortgage payment can be comprised of several separate fees.
Almost all mortgage payments are comprised of both principal and interest. Your mortgage principal is how much you originally borrowed and have to repay.
The interest rate is the fee a lender charges to lend you the mortgage loan amount.
Some mortgage payments include extra fees such as property taxes or private mortgage insurance (PMI)—typically a requirement when the down payment is less than 20%.
What do APR and interest rates have to do with getting a mortgage?
Your mortgage interest rate is the amount you pay to get a mortgage.
Interest rates can be fixed—do not change for the lifetime of your home loan—or adjustable-rate mortgage—remains set for a predetermined period, then can change based on market activity.
Interest rates are always calculated as a percentage of the remaining principal. But these rates can be affected by several circumstances, including (but not limited to):
- Inflation rates
- Your employment situation—employed, unemployed, or self-employed
- 10-year Treasure yield rates
- Stocks and bond markets
- Your credit report—containing your credit score and credit history
- Your debt-to-income ratio
- Where the home you want to buy is located
- The amount of your mortgage
- The type of loan you want
- Your mortgage loan terms
The annual percentage rate (APR) is considered a “broader measure” of how much it costs to borrow money.
Your APR is typically more than your interest rate because it includes additional charges associated with paying for your loan, such as:
- Mortgage brokerage fees
- Loan origination fees
- Private mortgage insurance
- Discount points
Get in touch with Assist Home Loans to guide you through your pre-approval process
What are your top mortgage questions to ask a mortgage lender? We want to know.
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