Doing your research and asking questions is important when looking for a mortgage lender. Not all lenders are the same, and it’s important to understand as much as possible before you move forward in the home loan process. Read on to discover all the details.
Knowing all the details when looking for a mortgage lender is really important. That's why we decided to help you with some of the most important questions to ask. Not all lenders are the same, and it’s important to understand as much as possible before you move forward in the home loan process.
Whether you’re purchasing a home or refinancing, having a list of mortgage questions to ask before making a decision should be your first step.
When determining how much you can borrow, lenders may consider your income level compared with debt, your employment status and your credit history. Talk to a lender about getting prequalified for a mortgage before you start shopping for your new home. This can make the whole experience go more smoothly.
To get the best rate and terms for your loan, try to put down at least 20 percent of the purchase price. Although a lower down payment won’t necessarily disqualify you, there is a chance that a monthly private mortgage insurance payment will be added if your down payment is less than 20 percent. Your down payment will affect other variables as well, such as your interest rate, terms and monthly payments.
Also, you should ask your lender for a direct interest rate quote, as well as the corresponding annual percentage rate (APR) for the loan. Since the APR accounts for fees and other loan-related charges, it gives you an apples-to-apples comparison among lenders. Don’t be afraid to shop around until you find one you’re comfortable with.
You should ask yourself what's the difference between a fixed-rate and an adjustable-rate mortgage. A fixed-rate mortgage keeps the same interest rate for the life of the loan, typically a 15- or 30-year term. This keeps your monthly payment for principal and interest steady and predictable over time. Adjustable-rate mortgages, or ARMs, have interest rates that change based on the market, so your payment will go up and down.
You also have to ask how many points the rate includes. A discount point is a fee paid to the lender at closing in exchange for a reduced interest rate. (1 point = 1% of your total mortgage amount.) Be sure to ask your lender how many points are included in the quoted interest rate and what the benefits might be to buying more or fewer points.