5 Questions To Ask A Lender When Getting A Mortgage Loan

A real estate mortgage is a key part of the house buying process. Your lender has a wealth of knowledge regarding its products. Here are some questions to ask him or her when getting a mortgage loan.

It might seem like it’s a very unequal relationship between you and your lender. You’re borrowing a fortune of money from them. But remember, as a customer you are essential to their business. Without borrowers, there wouldn’t be any profit for the bank. So don’t feel like you’re inconveniencing the loan officer with a few questions.

What type of loan are you best suited for?

There are tremendous differences between the various types of mortgages. The most common is the conventional one. It typically requires a 20% downpayment. It can be lower but you might need to pay a higher interest rate and pay private mortgage insurance (PMI).

If you or your spouse is somehow connected to the military, you should look into the VA loan. In some cases, you won’t have to put down any money.

For those without much cash on hand, an FHA loan is a good option. It has only a 3.5% down payment. It’s also far more lenient with credit scores. However, you’ll need to pay PMI, which can be fairly pricey.

USDA loans are government-subsidized. They’re for lower and middle-income families. You’ll need to meet certain income guidelines and it’s only eligible in certain areas. Sometimes a downpayment is not required.

What will the terms be?

There are many numbers when it comes to financial products. You should pay particular attention to the interest rate. Don’t be afraid to go to a few banks and shop around for the best rate.

Your mortgage payment is another number to look at. Combine it with the estimated tax and insurance payments. How does that fit into your budget? You might want to ask yourself if it is less expensive than rent?

What documents do you need?

Expect a frantic rush when you finally pull the trigger on the application process. Their due diligence department will need to verify everything is correct. If they don’t like what they see or the process is delayed, the financing could fall apart.

One way you can prepare ahead of time is by asking what documents the department will need. This often includes things like

• Photo ID (driver’s license or passport)
• Income verification (pay stub, tax return, w2)
• Account statements (from banks and brokerages)

There are also a lot of miscellaneous documents that they could need. For example, if you had family members send money, the department will need gift letters. They might ask for the information of your landlord. If you’ve had a divorce, they might require a letter of explanation.

What are my closing costs?

Closing costs add up. Besides paying for your share of the commission, you’ll need to pay for things like origination fees, recording fees, and various taxes. Discount points also fall under this category of expense.

Know what your closing costs are so that when the day arrives you have enough cash on hand to pay them.

Do you have any special offers?

Some banks offer limited-time deals that could save you money. Don’t be afraid to ask.

Getting a mortgage loan is an important financial transaction. Ask your lender important questions before applying.