Financing a new home is a huge decision, and you should feel comfortable and confident in your choice of lender before you start signing paperwork. The home-buying process can be a fraught experience, but don’t rush things unnecessarily — taking time to find the right lender is never a mistake. The best way to get a feel for a lender and a potential loan option is straightforward — ask questions! You’ll learn a lot about what you can expect, and your lender will learn about you, too. The more they understand your circumstances, the better equipped they are to steer you in the right direction. To help you get started, the Cushing Team of Guild Mortgage here in Reno is sharing ten questions to ask a lender before you commit to a loan.
1. Which loan is right for me?
There are all kinds of loans out there, and the right one will vary depending on your needs, your situation, and your goals. A good lender won’t suggest a loan without learning at least the bare minimum about your circumstances, so be prepared to share some details.
2. What’s the interest rate?
Mortgage interest rates fluctuate daily and will vary from lender to lender and from one loan to the next. Once you start zeroing in on the right loan, ask about the interest rate.
3. Can I lock the loan rate?
Because interest rates change so frequently, it can be a savvy decision to lock a loan. That way, you lock in a great rate in the event interest rates go up during the buying process. Ask about fees to lock the loan, how long it lasts, whether it covers all the loan costs, and if they’ll offer you the lock in writing.
4. What’s the required down payment?
Depending on the type of loan you get, the down payment can vary from nothing to the standard 20%. Keep in mind that a down payment below 20% will likely mean you’ll need to pay private mortgage insurance — another cost for which to factor. Ask your lender about what’s required, and what they personally recommend — you may be surprised at their answers.
5. What are the points and origination fees?
Buyers can pay down interest rates with points, which are equal to 1% of the loan amount. The more points you buy, the lower the interest rate. In some cases, origination fees or lender’s fees are also charged in addition to the points themselves, so ask for clarification.
6. What are the estimated fees and costs?
There are a number of costs associated with a loan, and many of them are from third-party vendors — things like credit reports, appraisals, title policies, escrow, recording fees, and taxes. You should get an estimate of all of these costs in the Loan Estimate, but it’s a good idea to ask for them before the loan application process to minimize surprises down the line.
7. Is there a penalty for paying off the loan early?
Paying more than your monthly mortgage amount means you can pay down the principle faster. But in some states, lenders can charge “unearned interest” if you pay off your loan early. Make a point of asking about prepayment and how it works with your loan, specifically in regard to any kind of penalty.
8. What’s your loan processing time?
Processing a loan typically takes between three and six weeks, so ask specifically about a lender’s typically turnaround. Keep in mind that you’ll need a closing date to write a purchase contract.
9. Do you approve loans in house?
Some lenders manage their own underwriting, while others outsource this stage. It’s the process of reviewing a loan and issuing certain conditions before approval or rejection. Ask your lender how they approach underwriting.
10. Do you offer guaranteed on-time closings?
Time is of the essence when you’re buying a home, and a loan that closes on time is critical. Ask specifically about your lender’s ability to guarantee an on-time closing.
Getting specific answers to these ten questions is a great starting point, but don’t limit yourself. If you’re unclear, ask for clarification. A good lender will have no problem answering your questions, and the more information you have, the more likely you are to enjoy a successful transaction. The Cushing Team in Reno is ready to help with your loan questions, so contact us today.