Deciding which mortgage provider is best for you is often a difficult process. There are many different factors ranging from the total costs to the types of mortgages that they offer. When deciding on a provider, consider these 10 mortgage questions you should be asking yourself first.
1) Do They Originate Loans in My Area?
This is perhaps the most important one to start with in our list of mortgage questions for prospective lenders. The reason for this is that many lenders you may find online only originate loans for a very specific area.
This is based on many different factors. Nonetheless, it mainly boils down to licensing requirements. If you’re looking into buying a home in another state, it’s very important to make sure that your provider works in the area the property is located in.
2) What Types of Mortgages Do They Originate?
The reason this selection makes our second pick for our list of mortgage questions is that it gives you an understanding of the options that they offer. The most common loan types that most mortgage companies offer include FHA, VA, Rural Housing, and prime loans.
More specialized options include jumbo mortgages and construction to perm financing. It’s important to make sure that the mortgage company you are considering offers the widest selection of loan programs possible to increase your chances of finding an ideal fit.
3) Which Loan Program Is Best for My Needs?
This is one of those mortgage questions that you may have to sit down with a mortgage officer face to face or make a phone call for. Once you have determined that a mortgage provider offers a wide selection of loan program types, you should work with a mortgage officer to find out which program is best for you.
Each program has its own unique requirements as well as its own advantages and disadvantages. Never hesitate to ask your mortgage broker for more information when in doubt.
4) What Will the Interest Rate Be?
Our number 4 for our list of mortgage questions is what will the interest rate be? Your interest rate is one of the most important things you should be focusing on when deciding which provider is right for you. Even a half a percentage point can significantly impact the total cost of your mortgage over the life of your loan.
To see the difference for yourself, consider using one of the free mortgage calculators online. Many online mortgage lenders have their current rates posted on their websites for informational purposes.
5) What Will My Monthly Mortgage Payment Be?
Our fifth pick on our list of the top mortgage questions you should ask is what will my monthly mortgage payment be? Once you have decided which loan program is right for you, the mortgage provider should be able to give you a breakdown of the estimated mortgage payment.
To get the most accurate number, it helps if you know the approximate purchase price of the home you are interested in. If you haven’t decided on a home yet, use a price that you are comfortable with. This starting point will offer a rough idea what your payments will be.
6) Is It a Fixed Mortgage or an ARM?
It’s very important that you learn what type of mortgage you will be qualifying for before deciding on a mortgage provider. This is why this is our number 6 pick for our list of mortgage questions.
A fixed mortgage is generally the more popular option. It provides set payment amounts and is much easier to budget for in the long-term. However, certain situations may favor an adjustable rate mortgage instead. These loans have much lower introductory rates. They are a popular choice for homeowners who plan to do a lot of upgrading after the initial purchase.
7) What Fees Are Associated with My Loan?
Another one of the most important mortgage questions you should ask is what fees are associated with my loan? Depending on your loan program type, you may be expected to pay an initial funding fee at closing. VA loans and USDA loans are 2 prime examples that fall into this category.
Some of these types of fees can be added to the total cost of your loan. This way, you reduce your total closing cost. When in doubt, don’t be afraid to ask for more detailed explanations before making a final decision.
8) Are There Prepayment Penalties?
While most loan program types have eliminated this practice, it’s still one of the most important mortgage questions you should remember to ask. Prepayment penalties can cripple borrowers who plan to pay their mortgage off early.
The prepayment penalty is typically the interest payment that would normally be owed for a specific number of months. For certain loan programs like FHA loans, one of their biggest advantages is that the lender cannot include a prepayment penalty clause in your mortgage.
9) What’s the Minimum down Payment Amount?
Asking about the down payment requirement is another one of those mortgage questions you should never forget about. With any loan, the higher your down payment, the lower your monthly mortgage payment will be.
With most loans, there is a minimum down payment required based on the loan program type. For FHA loans, the minimum is 3.5 percent. For other loan programs like VA and USDA loans, they often completely waive down payment requirements.
10) Is Private Mortgage Insurance Required?
Private mortgage insurance is a necessary evil with many different types of mortgages. For most mortgages, private mortgage insurance is required anytime you make a down payment amount smaller than 20 percent of the home’s purchase price.
The installments are typically billed monthly and are paid in addition to your mortgage. Once you have paid your loan amount to below 80 percent your home’s value, you can typically cancel the private mortgage insurance. Some loan programs like USDA and VA loans are exempt from PMI requirements.
By taking your time and doing your research, you can help guarantee that you pick the best mortgage provider for your needs. Remember to consider all of the mortgage questions on our list to help you make the best decision possible. If there are any other mortgage questions that you feel should be mentioned, please share them in the comments section.