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By Tara-Nicholle Nelson | Broker in San Francisco, CA

5 Questions to Ask Your Mortgage Professional

Everyone knows you’re supposed to be proactive and assertive when you take out a mortgage, carefully collecting and evaluating all sorts of information before you make the biggest deal of your life. But when the mortgage broker starts shooting sheaves of papers (OK, PDF documents) at you, it’s easy for your eyes to glaze over at the sight of so many zeroes, and tempting just to start signing whatever it takes to get that house!  

Here are 5 questions every smart buyer (or refi-er) should add to the list of issues to cover with your mortgage professional:
  1. Are you a bank, a broker, or both?  Generally speaking, mortgage lenders that are banks or have their own banking divisions (which many reputable brokerages do) have more control over the appraisal process, including the ability to submit your file to a pool of appraisers they know have some knowledge of your local neighborhood. Given the fact that non-local appraisers and the inability to communicate with appraisers under relatively new guidelines for brokerages are responsible for killing loads and loads of deals, working with a company that is or has a bank could be a deal-saving move, especially if the property is in an area that hasn’t had many recent sales or is otherwise challenging to appraise.


Also, some broker/banks that originate loans and sell them straight to Fannie Mae or Freddie Mac under the FHA loan programs offer the same benefits of an FHA loan - low down payment and moderate qualification guidelines - without the “overlays” imposed by some larger banks, which actually place a more restrictive set of guidelines on FHA loan programs. For example, FHA guidelines do not impose a minimum credit score, but many banks overlay their own 640 minimum FICO requirement. Broker/banks that sell straight to Fannie and Freddie often mirror the FHA minimum guidelines precisely.


Finally, brokerages with their own in-house bank and a large roster of lenders and programs provide the advantage of offering a wider range of fallback options than plain old banks or plain old brokerages - Plans A, B, C and D, if you will - which many borrowers need these days, in the (increasingly common) case your first choice bank or loan program doesn’t work out.

  1. Will you explain my Good Faith Estimate to me? May I also have a fee sheet or estimate of funds to close? The current, national standard Good Faith Estimate (GFE) is pretty clear, clarifying all sorts of deal points, from the broker’s commissions to the costs associated with the loan, but as a point of customer service, you should ask your mortgage pro to explain it to you (if they don’t do so under their own initiative).


The one shortfall of the the latest edition of the GFE is that, while it clearly shows the costs associated with a particular loan scenario, it does not always show so clearly the actual amount of funds you’ll need to close the transaction (which might be more or less than those costs)! So, ask your mortgage representative to prepare a fee sheet or an estimate of funds to close as early in the transaction as possible.

  1. How long will it take to close my loan? How much time will I need for loan and appraisal contingencies?  The time frames for closing your mortgage - which often drive the time frames for closing your home purchase - often vary widely depending on the type of loan and even the type of lender you work with.(Large bank loans originated by the bankers who sit inside the branch are notoriously slower to close, on average, than loans originated by brokers.) Similarly, the time it takes to get through the FHA loan appraisal and underwriting process might be much longer than it would take, all things being equal, to clear those hurdles and remove your loan and appraisal contingencies on a Conventional (i.e., non-FHA) mortgage.  


When you first meet with your prospective mortgage pro, talk with them about these time frames, so they can help you set realistic expectations and insert realistic time frames into your offer when you make it, to minimize the drama of a contingency clock that ticks way faster than your mortgage process.

  1. Are there any fees for the mortgage loan application/approval process? Some lenders charge for credit checks up front, and most require that you pay for your appraisal in advance (although the latter happens only after you find and get into contract on your property. One of the first questions you should ask, when you sit down with a new mortgage broker is how much cash you’ll have to come up with just for the privilege of having them run your application and take the first steps down the road to loan approval.

  1. How long have you been originating loans? And how long have you been with your company? Mortgage pros who have been around for a long time have the knowledge of advance troubleshooting, workarounds and backup plans, and the current underwriting practices it takes to get a loan closed in this restrictive mortgage market. If you found them in some way other than a referral, you can even ask for references from a few clients. Most mortgage pros who have been in business for awhile will be able to give you names and numbers of clients they’ve worked with on multiple purchases and/or refis: that’s a very good sign. You’ll rest a lot easier if you know that your loan is in the hands of a seasoned pro who others like you trust with their largest asset - and largest financial obligation.


P.S. - You should follow Trulia and Tara on Facebook!

Comments

By Rilian Ball,  Wed Jul 20 2011, 16:47
Great advice!
By Unbowed1,  Wed Jul 20 2011, 17:05
very nice.
By Julz Heaney,  Wed Jul 20 2011, 18:22
Another very helpful article!
By Cary Brooks,  Wed Jul 20 2011, 23:42
These are good questions, but I think the first one is out of date. I've been on both sides of the banker/broker or both as an LO. With the new riles that started in April, I was forced to AGAIN be just a broker and drop banking. It's complicated, but the net result to my clients is a reduction in costs from about .375 to .75 points on their loan. It also gives me much more flexibility to provide the best rates and get more loans approved. Appraisals in either case are exactly the same and I can close loans in 10 days on a purchase. It's a brave new world!
By Steve Savarese,  Thu Jul 21 2011, 04:33
Relevant to point #3 is how long will they lock the rate in at the quoted percentage
By Michael Solomon,  Thu Jul 21 2011, 04:38
Also ask the lender if there is any prepayment penalty and ask the lender if someone from their company will be attending settlement .When there is nobody from the lender attending settlement and there is a problem with the loan or the wire then you will need to get them on the phone .If there is a live body at the table there usually is not a problem
By mistygirl,  Thu Jul 21 2011, 06:23
Great advice! So can an appraiser be asked by a lender, buyer or buyer’s realtor to make sure the appraisal comes in at a certain amount? The reason for asking this question is that a buyer made an offer and it was countered by the seller. The buyer accepted but when the appraisal was done it came in low at the original offer. The buyer is getting a FHA loan so the appraisal amount will stay the same for six months for anyone else who may make an offer with an FHA loan. There are houses in the area that are comparable that have appraised at a higher value. It all seems too coincidental.
By sarah,  Thu Jul 21 2011, 06:59
i offered more than bank was asking on this reo and now i am wondering since they accepted my offer that it wont appraise out at what i offered so what happens if it doesnt.?
By Brian Petrelli,  Thu Jul 21 2011, 08:39
Great post (again). Good information for all buyers.
By Jeff Wilmoth,  Thu Jul 21 2011, 09:27
FHA does have minimum credit score of 580. However, do not assume that will get you to "1st base".
By Brent Mendelson,  Thu Jul 21 2011, 09:41
I usually have SOMETHING to nit pick about but not this time. One of the better articles on how to pick a good lender. Though I usually recommend staying as close to home as possible when picking a lender. We know the area better and the quirks of the states and counties. Even small states like MD have different ways of doing things that we don't know/forget sometimes.
By Maria Rocheleau,  Thu Jul 21 2011, 10:11
Good pointers and worthwhile reviewing with a new or firstt time Buyer.
By Michele Henderson,  Thu Jul 21 2011, 10:12
Sarah......you can then negotiate the price down. This would make your Buyers very happy!

About this article. I would only add this in! "How much do I have to put down?" What is the difference in monthly payments, and interest rates, if I go FHA, USDA, VA, or Conventional. How much, if any can I receive as an gift, before I have to add the Giftor to the loan documents.
By Herman King,  Thu Jul 21 2011, 10:33
How long does it generally take to close on a house?
By Julious Evans,  Thu Jul 21 2011, 10:39
Another much needed article! Thanks Tara !
By Bernie Hassan,  Thu Jul 21 2011, 10:46
Remember, as a consumer you have the right to an attorney's review of all documents that you sign!!
By Troy Sage,  Thu Jul 21 2011, 11:57
How about this. If you (the lender) don't close the transaction on time according to the purchase agreement, will you (the lender) take full responsibility for delays and pay per diem if required?
By Gary.sheila.murrell,  Thu Jul 21 2011, 11:59
Regarding Brent's comment of 7/21/11, if you are purchasing a home out of your area, is it better to get a lender close to where you currently are or where you will be? I'm inclined to get one closer to where you are since you probably know the area better, and also you will possibly have to travel to the closing site if it is out of the area (although I have done closings, as a seller, long distance using FedEx, etc). Besides, are lenders still selling your loans before you even make one payment?
By Faceoff,  Thu Jul 21 2011, 12:02
i'm just reing to buy my first house & diffrent truck so is lending tree good or bad cause my in come is low budget
an it hard to find bank's that will lend to my cause it ok so help i'm in il
By Chad Stewart,  Thu Jul 21 2011, 13:55
Good tips.
I agree with Brent, I usually recommend a lender close to home you are purchasing or very reputable. We ran into issues with out of area Brokers promising more than they can deliver. The law changes earlier this year shut down alot of Brokers & they turned into Bankers here.

In response to "Faceoff" , no I do not recommend Lending Tree, go with a experienced professionals recommendation.
By Richard Ramaci,  Thu Jul 21 2011, 14:50
Choose a lender who is offering the lowest rate AND lowest LENDER fee combination. Get it in writing. Location is irrelevant. You can get your best or worst deal from a local lender or from one 1000 miles away. Lock your rate as a first step as soon as you can. Usually, when a lender says you can’t lock until your loan is approved, there is a catch and you are opening yourself up to a bait and switch. Obtain a Lock Agreement, Description of Lender Charges, official 3 page GFE and Truth in Lending Disclosure at the time you lock your rate. 99% of people shopping for a mortgage do not ask the right questions. Be the 1% who does and avoid any chance of getting “bait and switched”.
By Richard Ramaci,  Thu Jul 21 2011, 14:58
I see a lot of people mentioning you go with a local lender. Maybe in some remote areas that has merrit. However, I am located in NJ. I am licensed in NJ, PA, NY and CT. I have funded over 850 loans for over $250 million dollars in the past 6 years at my current company/lender. I have never attended a closing. More than 50% of my business is through referals so I believe my clients are very happy.
By Sandy Thacker,  Thu Jul 21 2011, 15:02
Do business with a mortgage banker that has a 5 Star Rating

http://www.zillow.com/profile/CBC-BANK/
By NPK,  Thu Jul 21 2011, 16:27
Wish I had read this a few weeks ago!
By David,  Thu Jul 21 2011, 19:24
How about some advice on mobile home purchases?
By Cherie,  Thu Jul 21 2011, 19:35
If you are purchasing a home and the home has repairs that the Appraiser has to come back and review - expect a delay. The day an appraisal comes into a bank - they are very good about reacting within 24 hours due to the 30 day rule of response to the application. There are some great companies - actually most are at this point - look at the BBB report. Keep in mind that when a Loan Originator asks you for documents - they are only asking for paperwork, just get them and do not worry that it won't close - it is only paperwork (unless you are hiding something). If you have an attorney that is emotional or non-professional, please change law offices - it is one of the most stressful times of your life and if they aren't confidence builders - look elsewhere as you will get overwhelmed, frustrated and discussed with the process. Buying a house is not difficult, but you have to truly understand why and what is needed for paperwork. Ask questions! Be sure you completely understand the system as you are the only one taking responsibility for the loan after it closes. Be patient as requests for paperwork cna be up until the day before you close. Go with the flow and DO NOT GET FRUSTRATED - be factual and comprehend why what is needed.You can not say that you were not told something that was in the paperwork - read it. You can still go 100% financing - Save at least $2500 or get a gift of it to start the loan process and you might have it left after closing. Best Wishes Cherie` Malona - Sr. Loan Originator with Homestead Funding Corp.
By Cherie,  Thu Jul 21 2011, 19:43
Mobile homes are another whole specimen. Go on line to find a lender or ask the Management of the Park as they know the best place to go. Be sure to find out if it is taxed as a home or as a mobile vehicle as it makes a difference as to what loan you can get. Every town is different. Save as much as you can - possibly 30 % of the purchase price and have good credit. Be sure you don't owe any company past due monies -- pay them off and pay everything on time for a min of 12 months just to get a regular loan, nevermind a Mobile home loan. Good luck!
By Patricia Mcdade-ralya,  Thu Jul 21 2011, 20:02
I am currently looking for a home and am just about at the point of finding a lender. This was a timely and well-written article. Tara is one smart cookie.. Thank you
By Philip Hillerman,  Fri Jul 22 2011, 05:57
Thanks for the post, good informaiton. Finding the right lender can be the difference of buying your new home or loosing it.
By Manisha Jain, Broker, Realtor,  Fri Jul 22 2011, 09:04
good article
By Leonid,  Fri Jul 22 2011, 09:45
Advice number 1 is completely wrong.
Banks are excluded from disclosing true rate of your loan and often making additrional money on selling you a loan at higher, than the current rate. Thus, making Yeld sprewad Premioum on your loan and sticking you with the higher rate for 30 years.
Brokers are required to disclose such fees, although they may do the same hting as the banks do, the fee is stipulated in the GFE. Warn your broker that you are aware of such prctice and will not close a loan with such fees
By Richard Ramaci,  Fri Jul 22 2011, 10:21
Again, request to lock your rate as soon as you are under contract. Request a Lock Agreement, Descrption of Charges, GFE and TIL. Ask what the total lender fees are in addition to the rate. Compare the rate and lender fees... all with the same lock period... between lenders you are shopping.
By Wes Black,  Fri Jul 22 2011, 10:28
Another great informative post. Thank you
By Elliott R. Oliva,  Sat Jul 23 2011, 08:10
Excellent.
By Christina Haladyna,  Mon Jul 25 2011, 11:39
Excellent and very informative1
By Gi Jane,  Mon Jul 25 2011, 17:14
Good Info...Whst is the current rate for a VA mortgage loan of $450K with 700 Credit score...Thanks!
By Recover_all,  Mon Jul 25 2011, 18:28
Selecting a good lender is one whom can at least read your credit report and explain it to you.
By Nancy Nipper,  Tue Jul 26 2011, 07:23
I wish every buyer had to read this post before they purchased a home, they should know as much about the financing as they know about the house.
By Jason Shoumaker,  Tue Jul 26 2011, 08:43
Does every lender you are shopping pull your credit or can you have them log into your account and view your credit to reduce the number of inquiries?
By Helen Oliveri,  Tue Jul 26 2011, 15:22
Great information Tara!
By Tomsmith,  Wed Jul 27 2011, 00:22
Very helpful advice
By Allan Erps,  Wed Jul 27 2011, 04:53
A rate lock can be essential in volatile times. Also the Good Faith Estimate is called a Truth and Lending statement as well
By Faceoff,  Wed Jul 27 2011, 05:54
does anybody know anyhting about lending tree have done business whit them ?
By Justin Coleman,  Wed Jul 27 2011, 06:10
Allan, the GFE and TIL are two completely different items. The GFE will show the costs involved in the transaction. The TIL or truth in lending will show how much the cost of the money being lent to you will be as an Annualized Rate.
By Justin Coleman,  Wed Jul 27 2011, 06:12
Jason, If you are shopping Lenders and receiving full rate quotes your credit will be accessed by each Lender. We each pull credit through our own vendors to ensure accuracy.
By Justin Coleman,  Wed Jul 27 2011, 06:15
By Leonid, Fri Jul 22 2011, 09:45 - Not entirely true. If you can read a TIL (Truth In Lending) statement then shopping for your loan regardless of how much yield spread premium is in the loan should not be an issue. If the note rate is 4.5% and the APR is 4.877% between two loans, then they are identical to the consumer, however the originator on one might have made more in YSP.
By Miriam Rosa,  Wed Jul 27 2011, 19:49
Great article and very informative.
By The Michael Pierce Team,  Thu Jul 28 2011, 11:51
Informative article. Great job.
By Jeanne Feenick (908) 337-0943,  Sun Jul 31 2011, 08:54
..And accessibility -- matters greatly if you hit a bump - and this is a market where you are likely to encounter one or two!
By RYAN MCKINNEY,  Mon Aug 1 2011, 21:18
Great information.
By Cheryl L. Peck,  Wed Aug 3 2011, 07:23
Most people are so concerned with interest rates they forget there are other importgant aspects to the loan process. On any given loan program, rates don't vary much from lender to lender. This makes service a prime consideration!
By Cheryl L. Peck,  Wed Aug 3 2011, 07:25
Most people get so caught up with interest rates they forget other important aspects of the loan program/process. For any given loan program, interest rates don't vary that much from lender to lender. That means service is a prime consideration!
By Voices Member,  Wed Jun 5 2013, 13:37
I found this article to be extremely helpful, keep up the great work- Tara! I love reading here.

David | http://www.urgentcaresouthtampa.com/insurance.html
By Voices Member,  Mon Sep 2 2013, 14:23
I don't have a mortgage professional but I wish that I did have one! I will keep looking for one, though. I hear that they are more expensive than the cost of invisalign in Edmonton! :)

David | http://www.azarkodental.com/invisalign-costs
By Voices Member,  Mon Sep 2 2013, 14:27
Where is the best place to look for a mortgage professional? I looked all over town and the only thing that I could find was a root canal in St, Cloud, MN!

David | http://www.myrivercitydental.com/root_canal.htm
By mabelmargaret01,  Fri Mar 14 2014, 03:34
5 queries mentioned in this post are genuine one which even i have faced.


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