You’ll be making a lot of big decisions in your home buying journey and choosing the right lender is one of the biggest. Your lender is who will be offering you your mortgage loan so you have the funds to purchase your new home. Because this is a major financial and long-term commitment, you need to ensure that you’re comfortable with your lender. Before committing to a loan, research and evaluate all your options — from various loan programs to various loan terms. There are a lot of variations when it comes to home loans — more than you think — so be sure to research and shop around in order to find the one that’s 100% right for you.
When initially meeting with your lender, begin by discussing your short- and long-term goals. Share with them why you want to buy a house. Discuss such things as: Who will be living in it? Will there be kids (now or in the future)? Most importantly, talk about how much you’re willing to spend each month on your mortgage payment. Your monthly payment is notably more important than your purchase price. Also, discuss how long you plan to be in your new home, as some loans have prepayment penalties. The more your lender knows about you, the better assistance and guidance they can offer you regarding a loan.
Ask your lender to go over mortgage loan basics and terminology. Chances are you don’t discuss FHA versus Conventional loans in your everyday conversation. There is a lot to take in, and even if you’ve gone through this process before, policies and programs change. Your lender will be up to date on all the “latest and greatest”, however the more knowledge you have the better you will understand the major complexities of borrowing hundreds of thousands of dollars.
So now you should be feeling comfortable with your lender and in turn, your lender should have a good understanding of your specific situation. Listed below is a guideline of the important questions to ask your lender, for you to reference. Use this list as a basic guide, but don’t feel that you’re limited to these questions. Reflect on your specific situation and share anything pertinent in your financial background.
- What is the difference between FHA / VA / USDA / conventional loan types?
- What is the difference between the interest rate and annual percentage rate?
- What is private mortgage insurance and how can I avoid paying it?
The Borrower Specifics:
- What is the best loan option considering my down payment potential?
- What is the total amount I should expect to pay at closing, including taxes and closing costs?
- How and when can I lock in my interest rate?
- What appraisal requirements are associated with my loan option?
- Will I incur a prepayment penalty with any of my loan considerations?
The Lender Specifics:
- What are your loan origination fees (“lender fees”)?
- Are your loans approved and processed in-house?
- Do you guarantee on-time closings?
- Are you available evenings and weekends, should I need to get in touch?
- Will your company sell my loan after closing?
Reach out to the lender before your first meeting, so you can provide them with all of the financial documents necessary to determine your eligibility. This extra work on the front end will make your first meeting with the lender more productive.