Questions to Ask Your Mortgage Broker
How much cash do I need to close?
Finding out this magic number will help with determining what type of offer a real estate agent should make on a buyer’s behalf, how much cash a buyer will need when to close, the lender a buyer chooses, and could potentially salvage a buyer’s earnest money.
Knowing the cash needed to close will help a borrower’s real estate agent with negotiating coverage of closing costs. It can help determine what type of loan buyers ultimately go with. If a buyer needs all closing costs paid, they’d need to go with an FHA loan over a conventional loan, as conventional loans only allow sellers to pay up to 3% of closing costs and FHA allows for 6%. There are also 100% financing loans that allow for no money down, these do typically yield higher interest rates, however.
Lender’s all charge different fee’s for closing costs, getting these costs from multiple lender’s can aid in a buyers decision-making process. Earnest money may be at risk if a borrower backs out outside of the financing contingency period. Not knowing closing costs puts buyers at risk for not having enough cash to close, and learning this too far down the road puts borrowers earnest money at risk.
Can you explain which types of loans are best suited for my needs?
Lenders offer various loans. Often they do not volunteer all of the various loans buyers qualify for. The burden falls on buyers. There are down payment assistance and lower down payment options for borrowers that are cash poor. Make sure you ask about these.
Lenders have loan products for distressed homes, allowing buyers to rehab homes with borrowed funds. Borrowers who rush into getting a loan can find themselves stuck with bad financing terms.
Do you approve loans in-house?
Buyers will find a wide variety of lenders out there, some with more capabilities than others. The loan officer is the person borrower's interact with, but there will be others involved, like the mortgage underwriter, who will determine if a buyer can get the loan.
A company that approves loans in-house is going to be better equipped to adapt to potential hurdles in a borrower’s mortgage. For example, if there is a problem in your credit report, an in-house underwriter could discuss it with the loan officer and get it ironed out. An out-of-house underwriter might just deny the loan and move on with the next application.
What is my interest rate?
Determining the estimated interest rate will help buyers determine which lender to choose, as the rate determines your monthly mortgage payment. Different loan products also yield different interest rates.
Do you charge an origination fee?
The origination fee is an expense charged by most lenders for setting up a loan. The lender you are dealing with may or may not have a fee. If they do, this expense may vary compared to the fee charged by other lenders. You may be able to negotiate on the origination fee. It can’t hurt to try!
Again it is vital to keep in mind the total cost of the loan. If one lender has an origination fee higher than another that should not preclude you from choosing them. It is all about the total financial output on your part.
How does your rate lock policy work?
When we are in a period of uncertainty with interest rates, the rate lock can become a vital decision point in the loan. Many borrowers will want to have the comfort of locking their interest rate.
These are the questions you should be asking regarding rate locks:
Do you charge a fee to lock in my interest rate and if so what will it be?
How long will the rate lock be for?
Will there be a cost to extend the rate lock? How much will it be?
Will you give me the loan lock-in writing?
Do you charge a penalty if I repay early?
Although some states have made it illegal to charge an early payment penalty, some states still allow it. You want to be aware of the consequences in case you try to pay the loan offer early.
Even getting the home refinanced or going to another lender could lead to penalty fees with certain lenders. With the number of choices in lenders today, you’re probably better off skipping any mortgage companies who would charge a pre-payment penalty.
. What should I avoid doing to preserve my pre-approval?
Making changes to your finances can cause a lender to say no, even if you have gotten pre-approval. Ask the lender for a checklist of things not to do so that you can avoid losing your loan. One of the most common ways buyers end up losing their loan approval is by purchasing a car at the same time their buying a house. Another way is buyers moving cash in and out of their bank accounts.
An excellent mortgage broker will go over all the things a borrower should not do so the loan goes through without a hitch. If you are buying a home for the first time, it is effortless to make mortgage mistakes.