Here are eight questions and explanations to make sure you are fully prepared when taking your next mortgage loan application.
Many borrowers end up getting frustrated or hurt because their expectations were not met. Knowing what questions to ask your lender during or before the loan application process helps to make your mortgage approval process as smooth as possible.
1. What are the documents I need to provide in order to receive a full mortgage approval?
An experienced mortgage professional will be able to uncover any potential underwriting challenges up-front by simply asking the right questions during the initial application and interview process.
Residence history, marital status, credit obligations, down payment seasoning, income and employment verifications are a few examples of topics that can lead to stacks of documentation required by an underwriter for a full approval.
There is nothing worse than getting close to funding on a new home just to find out that your lender needs to verify something you weren’t prepared for.
2. How long will the whole process take?
There are many factors to consider in the overall time line such as: processing, underwriting, title search, appraisal and other verification processes and communication between you and the lender is essential.
When all of the documents and questions are addressed ahead of time, your loan officer should be able to give you a fair estimate of the total amount of time it will take to close on your mortgage.
You should also inquire about anything specific that the loan officer thinks may potentially hold up your file from closing on time.
3. Are my taxes and insurance included in the payment?
This answer to this question affects how much your you’ll have to bring to closing.
If you include your taxes and insurance in your payment, you will have a higher monthly payment to the lender but then you also won’t have to worry about coming up with large sums of cash to pay the taxes when they are due.
4. Will my payment increase at any point after closing?
Most borrowers today choose fixed interest rate loans, which basically means the loan payment will never increase over the life of the loan.
However, if your taxes and insurance are included in your payment, you should anticipate that your total payment will change over time due to changes in your homeowner’s insurance premiums and property taxes.
5. How do I lock in my interest rate?
It’s good to know what the terms are and what the process is of locking in your interest rate, especially since rates tend to move several times a day.
Experienced loan officers pay close attention to market conditions for their clients, but you have the final word on locking in a specific interest rate at any given moment of time.
6. How long will my rate be locked?
Mortgage rates are typically priced with a 15, 30, 45 and 60 day lock periods. You may decide to hold off on locking, especially if you are purchasing a bank owned property as these tend to take longer to close.
The way the lock term affects your pricing is as follows: The shorter the lock period, the lower the interest rate and the longer the lock period the higher the interest rate.
7. How does credit score affect my interest rate?
This is a super important question to get a specific answer on, especially if there have been any recent changes to your credit scenario.
8. How much will I need for closing?
Ask your Loan Officer to estimate how much money you should budget for so that you are prepared at the time of closing. You may need to bring in money for the closing costs and prepaids.
Remember, the more you understand about the entire loan process, the better your experience will be. Most frustration that is experienced during the home buying and approval process is largely due to unclear expectations.
You can never ask too many questions…
