Compiling a list of mortgage questions to ask potential lenders is just the beginning. According to NerdWallet, already knowing the answers you’re looking for puts you ahead of the game.
- Which type of mortgage is best for me?
This question will help you know if you’re talking to just a producer (a salesperson) or a quality advisor. When you ask about your loan options, the mortgage lender should tell you all of the pros and cons depending on your particular situation.
- How much down payment will I need?
A 20 percent down payment is every lender’s ideal, but you also have choices. Qualified buyers can find mortgages with as little as 3.5 percent down, or even no down payment. The best lenders will take the time to walk you through the choices.
- Do I (or the property I’m buying) qualify for any down payment assistance programs?
If you really want to size up your mortgage lender’s value, this is the question that will do it. Lenders with knowledge of local, state and national down payment assistance programs—and the wherewithal to help you navigate the process—are well worth the hunt.
- What is my interest rate?
Lenders can move the needle on your interest rate numerous ways, most of them involving additional fees. Talking to at least a couple of lenders will give you an idea of a ballpark interest rate for which you’ll qualify. Let’s say it’s 5 percent. We’ll call that your payment interest rate, because that’s what your monthly mortgage payment will be based upon.
- What is the annual percentage rate?
When you have zero-discount-point APRs from competing lenders, you can see who has the lowest fees for the same payment rate. In our example of receiving a 5 percent payment rate, you’re looking for the lowest APR based on that payment rate. Maybe one lender offers you a 5.25 percent APR, and another a 5.5 percent APR. The 5.25 percent APR lender is charging you fewer fees.
- Are you doing a hard credit check on me today?
It’s always good to know when the lender is going to perform a “hard” credit check, called a “hard pull.” That type of payment history inquiry shows up on your credit report. Lenders need to do this to give you a firm interest rate quote. When you’re shopping more than one lender, you’ll want these hard credit pulls to occur within just a week or so to minimize the impact on your credit score.
- Do you charge for an interest rate lock?
Once you’ve decided on a lender, you may want to lock in your interest rate at some point. This ensures that it doesn’t go up, although it won’t go down, either. The answer you’re looking for on a typical home loan (not a construction loan) is: There’s no charge for an interest rate lock.
- Will I have to pay mortgage insurance?
If you put down less than 20 percent, the answer will probably be “Yes.” Even if the mortgage insurance is “lender paid,” it’s likely passed on as a cost built into your mortgage payment, which increases your rate and monthly payment. You’ll want to know just how much mortgage insurance will cost and if it’s an upfront or ongoing charge, or both.
- What will my monthly payment be?
Knowing what your monthly mortgage payment will be is key to the entire deal. You’ll also want to ask if there is any prepayment penalty if you pay off the mortgage early if you move or refinance. The answer should be “No.”
- Do you have an origination fee?
An origination fee provides additional profit for the lender beyond what’s built into the interest rate. A good follow-up question: What are all of your lender fees? Be sure to specify “lender fees.” They’ll know what you mean, because there are also additional costs.
- What other costs will I pay at closing?
Fees that are charged by third parties—such as for an appraisal, a title search, property taxes and other closing costs—will be paid at the loan signing. These costs will be detailed in your official Loan Estimate document and your Closing Disclosure. But the sooner you know what they are, the better you can shop, compare and prepare for them.
- How (and how often) will I be updated on the loan’s progress?
Will you have a single point of contact throughout the mortgage loan process? And how will you be updated on the progress: by email, phone or an online portal? Establishing your service expectations upfront, and seeing just how eager the lender is to meet them, will give a clear point of comparison among lenders.
- How long until my loan closes?
Knowing your target closing and move-in dates can help you prepare. And just as important: Ask what you should avoid doing in the meantime—such as buying new furniture on credit.
