8 Questions to Ask Your Mortgage Lender When You're Buying Your First Home
Buying your first home is exciting. And a little scary.
Unless you're paying cash (lucky!), you'll be getting a mortgage like the rest of us. Before you commit to a loan that may last longer than anything else in your life, ask all the right questions.
It’s easy to think you don’t have a lot of say in what your mortgage looks like, but that’s not true. Every loan is unique, and yours needs to fit your budget and your long-range plan.
Make sure you ask your lender these questions before you start working together and that you continue to ask questions throughout the process as they come up. That will help you understand everything that’s going on and help make sure you get the best mortgage for you.
What types of mortgage do you offer?
Not every mortgage lender offers every type of mortgage.
Do a little research on mortgage types before you talk with your lender. Once you’re there, ask what types of mortgages they offer and which they’d recommend for you.
If you're considering anything other than a conventional loan, like a VA loan, FHA loan, or HomeReady mortgage from Fannie Mae, make sure your lender has the experience to work with you.
Will you sell this loan?
It’s not uncommon for mortgage lenders to sell your loan, so don’t be too surprised if the answer is yes. This is a chance for you to talk over what to expect when and if this does happen.
The main thing to remember is that the terms of your loan shouldn’t change, even if it gets sold. You’ll get a notification when it happens, and the smart thing to do is to read over all the details and make sure the new company didn’t make any mistakes.
What minimum down payment is required?
Most traditional loans require a twenty percent down payment, but others, like FHA loans, don’t.
Before you get too far along in the process, check to see how much you need for a down payment. That’ll change how much house you can afford, because you’ll either need to adjust your down payment or tack on a private mortgage insurance (PMI) fee to your monthly payment.
How can I lock in the interest rate?
Interest rates can fluctuate between the time you apply for the loan and the time you close it.
Locking in your interest rate will be good to help you plan, especially if you’re getting a low one and think they might go up soon. If you're getting an adjusted rate mortgage (ARM), find out how much the rate can go up at the end of the first adjustment period.
How long will it take to close the loan?
Generally your loan closes pretty quickly. But if it’s a busy time of year, it might take a little while longer.
You need that information to help you plan your home buying timeline. Last year's changes to RESPA and TILA might make loans a little slower to close.
What are the closing costs?
Knowing the closing costs up front will help you budget how much you’ll need to pay immediately when you buy the home. Knowing that number will also make it easier for you to negotiate your closing costs with your seller.
How many points will I pay?
Your loan might also include discount or origination points. It might not make sense for you to pay too many discount points, so ask your lender to explain what points you’re paying and what they’re for.
A point is equal to one percent of your loan. A discount point is a fee paid upfront to reduce your interest rate, and is tax deductible. Origination points are fees paid to cover the cost of making the loan.
Some are deductible, some are not. Find out before you commit.
How much will I actually pay every month?
Make sure you get all the details on how you’ll be expected to pay the loan and how that might change over time.
That means finding out your monthly payment, what the worst-case scenario is for an adjustable-rate mortgage, and if you have any prepayment penalties. Ask your lender to give you an amortization calendar for the life of the loan. Read it.
Are you ready? What other questions do you have about your first mortgage?