When you’re looking for a new house to buy, selecting a property is only half of the battle. You also want to be sure that you’re choosing an excellent mortgage lender who will work with you to allow you to purchase the home you want, set up a payment schedule you can live with for the next several years, and give you trustworthy service. Whether you think you’ve already settled on a mortgage lender or you’re still trying to select the one that’s right for you, make sure you’re asking these key questions before you choose.
1. How will you choose the type of mortgage that’s right for me? There are several types of mortgages available, from VA loans to conventional loans, loans with government backing to help secure your investment, and more. You might select a fixed-rate mortgage or an adjustable-rate mortgage depending on how the housing market looks at any given moment. With so many options available, you want to work with a reputable mortgage lender that will help you select the type of mortgage that is the best fit for you and your family. Your lender should walk you through the process, discuss your options with you, and help you make a decision based on all the information available.
2. What types of mortgages are offered by your company? Some companies only work with a very specific selection of mortgage offers. This will limit your choices when it comes time to select the mortgage type that works best for your family. For this reason, it’s important that you have any idea of what type of loans you’d like to consider before you choose a mortgage lender. If your preferred lender doesn’t offer the loan type you need, it’s time to move on to other options.
3. What fees can I expect when I close on my home with your company? There are a number of one-time fees associated with buying a home. You need to be prepared to deal with those fees, many of which you’ll need to be able to cover before your loan kicks in to cover other expenses. Some mortgage companies have higher closing fees than others. In some cases, a higher interest rate over the lifetime of the loan may free you from the need to pay closing fees, while in others, you can reduce your interest by paying some of the closing fees up front. Ideally, you want to know what fees to expect up front so that you can work them into your budget. Before you select a mortgage lender, make sure you know what fees to expect from their end so that you can make a fully-informed decision.
4. Will I face prepayment penalties if I pay off my loan early? When you set up the payment schedule for your mortgage, you should set an amount that you know you’ll be able to afford to pay each month. On the other hand, by saving money and putting some of that savings toward your home loan, you can have your mortgage paid off sooner. If you plan to pay off your mortgage early, make sure you know whether or not there will be fees associated with that early payment.
5. Will overpayments be put toward my next payment, or toward the principal? You have a little extra money this month, so you’d like to go ahead and put some extra toward next month’s mortgage payment. Your tax return comes in, and getting ahead a month or two on your mortgage seems like a great way to spend it. It’s important, however, to know how the money will be used when you send it in early. In many cases, the mortgage company will put any additional amount paid toward the principal of the loan, not toward your next payment. While that’s great for getting it paid off sooner, it leaves you still responsible for making the next month’s payment on time–which can be a real problem if you’re not expecting it. Instead of getting caught in this trap, make sure your contract is clear about how to handle early payments.
6. What down payment is expected in order to secure the loan? The percentage you’ll have to put down as a down payment will vary widely depending on the type of loan you’re planning to secure. While putting down a larger percentage can decrease your interest rates, payment amounts, and the amount of time you’ll spend paying off the loan, as well as offering different mortgage options, you don’t always have a choice. Understanding what a lender expects up front will help you make the right choice for your family.
7. What documents are required to secure a loan through your company? There are plenty of documents that you can expect to have to provide, including proof of income. Knowing what you need to bring with you when you’re ready to apply for a loan will make the process flow more smoothly. Not only that, if the lender asks for a document you’re not able to provide for some reason, you’ll be able to make a different choice of lender.
8. What kind of time frame am I looking at with regards to loan approval? Some lenders are able to process your loan application more quickly than others simply because they are less busy. Others may need more time. If you’re in a hurry to move into your new home, it may be necessary to choose a mortgage lender with a shorter wait list in order to streamline the process and make it easier for your family. Make sure you have an idea of how long your family can afford to wait for the loan to go through before choosing a lender with a long wait time–and don’t assume that you’ll squeak through on the short end of an estimate, either.
9. Is mortgage insurance necessary for my loan? Mortgage insurance offers your lender protection in case you’re no longer able to make payments on your loan. While necessary, it does increase your overall cost. Knowing that this needs to factor into your budget may change the way you plan, so make sure you understand whether or not there is a need before you make a decision about the mortgage lender that’s right for you.
10. Is there anything that could delay approval of my loan? Some mortgage lenders will wait to approve a loan if you’ve just changed jobs, recently divorced, or had another sudden change in your financial status. Understanding the issues that could cause delays will allow you to make a more effective decision about the company you choose. Keep in mind that most mortgage lenders will have similar delays associated with major financial events that might impact your ability to pay on time each month, so if you’ve recently experienced such a major change, you may need to provide additional proof of your reliability in order to move your mortgage through.
Bonus question: How do you help make my offer competitive? In a competitive market, price is not the only factor sellers consider when deciding to accept an offer. The lender plays a role in having your offer accepted, and potentially much more than people realize. Here is my list of local lenders that will help you make a competitive offer.
If you’re struggling to find a mortgage lender that fits your needs or you aren’t sure where to turn for the help you’re looking for, contact me. I have a number of mortgage lenders that I’ve worked with successfully in the past and would be happy to answer any questions you might have about them.