Questions to Ask Your Lender
March 21, 2024
Among all of the big decisions you’ll make in your home-buying journey, choosing the right lender is a biggie. Your lender will be offering you your home loan, so you have the funds to purchase your new home. You’ll want to make sure that you’re comfortable with your lender and have evaluated all your loan options before committing. From different loan programs to different loan terms, there are a lot of variations out there — more than you think — so be sure to shop around and find the one that’s 100% right for you
When talking to your lender, start by discussing your short- and long-term goals. Talk to them about why you want to buy a house. Who will be living in it? Will there be kids (now or in the future)? Talk about how much you’re willing to spend each month, keeping in mind that your monthly payment is arguably more important than your purchase price. Discuss how long you plan to be in your new home, as some loans have prepayment penalties. Make sure your lender gets to know you well; the more your lender knows about you, the better assistance and advice they can give you.
Chances are you’re not going around talking about Freddie Mac and Fannie Mae on the regular — ask your lender to go over mortgage loan basics, as there is a lot to digest (even if you’ve done this before). Build a strong foundational knowledge, so you better understand the bigger complexities of borrowing hundreds of thousands of dollars.
Once your lender has gotten to know you and your situation better, ask them these important questions. Use this list as a guide but know that you’re not limited to these questions. Think about your specific situation and share anything pertinent in your financial background.
The Basics:
- What is the difference between FHA / VA / USDA / conventional loan types?
- What is Freddie Mac / Fannie Mae / Ginnie Mae? How can these organizations help me achieve my goal?
- What are the pros and cons of fixed-rate loans / adjustable-rate loans / interest-only loans / negative amortization loans?
- What is an interest rate?
- What is an annual percentage rate?
- What is private mortgage insurance?
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?
Pro tip! Don’t be afraid to negotiate. Lenders have been known to match interest rates and lender incentives, including closing cost credits!
Bonus! Get in touch with the lender before your first meeting, so you can provide them with all of the financial documents necessary to determine your eligibility. Extra work on the front end will ease your stress in the long run. Trust me.
