Buying a home is both exciting and scary, especially when it's your first time! It’s crucial that you have a good mortgage lender on your team in order to ensure a smooth transaction.
You spend hours each night scanning the Internet and reading the real estate section of the newspaper looking for the perfect home. However, many home buyers do not give enough attention to finding the right mortgage company and often spend more for their mortgage than needed, because they don't know what questions to ask their lenders. Here are the MUST DO questions to ask a mortgage lender:
EXPERIENCE AND REFERENCES – How Long Has The Lender Been In The Business?
Ask lenders about their experience in the industry and their experience helping home buyers in your similar situation. Fully disclose your goals to loan officers and ask them how they would best handle your situation. Write down each loan officer's answers to reference when you make a decision who to apply with.
Ask your real estate broker or agent for references of mortgage brokers that have performed well for their previous clients. And don’t be afraid to ask the mortgage lender to provide you a list of references of home owners that they have helped in the recent past!
LOAN PROGRAM OPTIONS – What Types Of Loans Do You Qualify For?
Different mortgage lenders provide different mortgage products. And each homeowner may qualify for different types of loan programs depending on their credit, income, down payment, and many other factors.
Ask each lender to provide at least two different mortgage programs for your needs. Ask questions about each loan program until you fully understand how each loan works. If you don't understand something about the mortgage program, continue to ask questions until you do.
What about Mortgage Insurance? Some mortgages, particularly those with low down payments, will require you to purchase mortgage insurance. Mortgage insurance appears as an addition to each monthly bill until you've paid off a certain amount of the house, usually around 20 percent of its value.
COST OF THE LOAN – Can The Lender Provide An Estimate?
Every mortgage transaction includes a series of fees. These vary from lender to lender and can potentially add up to thousands of dollars that you're responsible for paying up front. Ask your lender to provide a list of the fees associated with the mortgage, along with an estimated cost for each fee. Get an explanation for any fees that you don't understand so you know where your money is going and how much to set aside.
Inform each lender that you intend to shop your loans with several other lenders. Ask them to lower the fees paid to their company. Lenders often negotiate origination and discount fees when facing competition.
INTEREST RATES - What Rates Do You Qualify For?
Mortgage lenders offer different interest rates to borrowers based on rates elsewhere in the economy, the level of demand for mortgage loans and the borrowers' credit. If you have good credit, you may be able to take advantage of special low interest rates, which can add up to considerable savings over the life of the loan.
Ask the loan officer for a lower interest rate. Interest rates are also negotiable, just like origination and discount points. Request a GOOD FAITH ESTIMATE (GFE) - This puts the offer in writing and binds loan officers legally to the interest rate and most of the fees.
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