Questions to ask your mortgage lender that'll help you land a great loan.
Doing anything for the first time can be stressful, and meeting with a mortgage lender is no exception. In fact, talking about every aspect of your financial past, present, and future is downright overwhelming. But don’t let those feelings make you forget that there are important questions to ask your mortgage lender while you’re there. The information you gather will help you find the best home loan for you.
What is the interest rate?
Part of your monthly payment will be interest. How much interest you pay is determined by the interest rate, and your interest rate is determined by a number of factors, including your credit score. Be sure to understand the difference between the interest rate and the annual percentage rate, or APR. Both are important percentages that will help you pick the best deal.
Is the mortgage fixed or adjustable?
One of the questions to ask your mortgage lender is if a mortgage has a fixed rate or if it’s an adjustable-rate mortgage (ARM). The interest rate on a fixed-rate mortgage remains the same for the duration of the loan, while an ARM is typically fixed for a shorter period and then fluctuates at regular intervals. Many home buyers favor the fixed-rate mortgage, but there might be scenarios where an ARM is smarter, like if you don’t intend to stay in the home for a long time. If you opt for the ARM, make sure you know when and how often the rate will change.
How do I qualify for this loan?
A lender uses many factors to decide if you qualify for a mortgage. Your credit score and financial history matter, as well as how much you currently make and how much you have stashed away. They’ll also look at how much debt you have compared to how much income you have, known as your debt-to-income ratio. A good gauge for whether or not you’ll qualify for a mortgage is getting pre-approved.
What are the mortgage fees?
When you are ready to close, you will be expected to pay a few one-time fees. They are also known as points, and for every point you pay, the lender reduces your interest rate by 1 percent. If you don’t want to pay closing fees, see if your lender will agree, but be warned: this will come at a higher interest rate.
What is the minimum down payment?
The more you put down on a house, the better. But saving up for a big down payment can be tough. The standard down payment for a conventional loan is 20 percent of the home’s sale price. But with other types of mortgages, you can put down less. With an FHA loan, for example, as little as 3.5 percent down could make you a homeowner.
Do I have to pay mortgage insurance?
If you put down less than 20 percent, you’ll likely be required to pay private mortgage insurance, or PMI. The fee is typically included in your monthly payment until your loan-to-value (LTV) ratio falls below 80 percent and can cost up to $100 per month for every $100,000 borrowed.
What is the monthly mortgage payment?
The number you’ll be living with on a monthly basis is, of course, your mortgage payment. The size of your loan is typically tied to how much you can afford to pay each month. Your mortgage payment will include a portion of your principal, which is the actual cost of the house, your interest due, homeowner’s insurance, property taxes, and other fees.
When you find out how much the mortgage payment is, be sure you can afford to pay it and the other costs of homeownership, like maintenance and repairs. You also want to make sure you have enough left over to live the life you want, whether that includes travel, veterinary bills, or yoga classes.
These are just a few questions to ask your mortgage lender. When you sit to chat, they will hopefully show the lender that you are taking this seriously and eagerly anticipate achieving your goal of home ownership.