If you are thinking to search for a home online, then you are thinking right. It’s fun to look for homes online and go to those open houses than it is to research your home loan. During your house hunting, you will find many wonderful homes and think yourself living in them. But it’s the financing that stops you and doesn’t allow you to get into a home altogether. This is maybe because you may be one of those homebuyers who doesn’t know where to start when it comes to home loans.
It is seen that most of the homebuyers don’t look for a mortgage lender at all—they hang around the first home they find. Just think, would you propose a person you met on the first day itself? You don’t, right? This is what you should be doing when you’re looking for a mortgage lender. Just keep looking for more lenders and stick to the one who can understand you well and your requirement.
So before you select a lender you should ask some important questions to know more information that is very vital.
Let’s look at some questions you should ask.
1. Ask a lender about the process for pre-approval and closing
Ensure the timelines of the lender aligned with your home purchasing goals. Know when they will consider your credit score. During that time, don’t open or close any accounts or use your credit for any purchase. It’s better that you should read your own credit score first to review for any issues you’ll need to solve that may negatively impact your credit score. Know the expiry of the pre-approval. Know the lender’s closing process. Where it will be going to take place? Will they work at a particular law office or do they do it in their home? Some lenders can close the things at your home or even online.
2. Ask how the communication will take place with homebuyers?
You would like to know everything about the loan. So know how they will handle your loan process and all the required steps. Will you get an account representative who informs you of all the updates? Will you get an online system with notifications? Just know how you would communicate and what works for your schedule.
3. Ask what will be your down payment requirement?
Your minimum down payment will depend upon the type of loan, your lender shows you. Ask lender about how much you can put down and your goals for a monthly payment. If you are a member of the military, you can select VA loans which offer zero percent down.
Ask the lender whether they can help you participate in any down payment assistance programs. There are several homeownership programs available that can help you save on your down payment and closing costs. State and local housing agencies administer a variety of programs. They approve lenders who can issue loans with those programs.
You should find out the low down payment programs and accompanying down payment assistance programs lenders can offer. Look for programs available in your market and talk to your lender and realtor. Don’t forget to ask about the Interest Rate and Annual Percentage Rate.
The annual percentage rate (APR) is created by a complex calculation that covers the interest rate and lender fees divided by the loan’s term. Ensure that lenders compute APR correctly. Also ask about interest rate adjustment frequency, maximum annual adjustment, the highest rate, index, and margin.
4. Ask about the discount points and origination fees?
Some lenders charge origination fees along with the points. The more points you pay, the lower the interest rate. Remember, points are also tax deductible. Eventually, the important question you should ask is there anything that could delay your closing.
Purchasing a home is a complex process as it involves many stages and requirements. The delays are common; the best ways to get rid of them talk to your lender and give them the updated documents as quickly as you can. Along with your pre-qualification, submit additional information for review and approval.
5. Ask how you can qualify for a loan?
A lender looks at many factors to qualify you for a mortgage. Of course, your credit score, financial history matter, your current earnings, and your savings. Importantly, they’ll look at how much debt you have compared to how much you earn. A simple thing you need to do is ask as many questions as possible or get clarified on all your doubts before you take the loan.