5 Questions To Ask When Choosing A Mortgage Lender
It is important to know the right questions to ask in order to easily differentiate the lenders and know which is more suitable for you. Here are five great questions we recommend you ask.
1. How quickly can you get me a pre-approval letter tailored to my specific property?
When you find the perfect property, you'll likely want to move in quickly. Proper preparation is key to your likelihood for success and can be the difference between getting that dream home or not. Having a preapproval letter is a crucial part of that preparation. It allows you to submit a more attractive offer and, if accepted, move quicker towards closing.
Many parts of your offer affect how competitive or attractive your offer is. A small part of that is how the Preapproval letter is addressed. It helps if the letter has the details (address, price, etc) of the the specific house that you are bidding. It goes towards the impression that the offer was tailored to the specific house because sellers tend to appreciate that sort of thing.
As long as the home you are trying to buy falls within your preapproved parameters, custom preapproval letters are easily doable. Find yourself a lender that is responsive and can quickly tailor the preapproval to the house in question to increase your chances of success.
2. How much can I afford?
While credit worthiness is one of the most important factors in obtaining a loan, debt to income ratio is key in determining how much a lender will allow you to borrow. Another key factor is the amount of your down payment. Great credit may make you attractive in determining your likelyhood of paying back a loan, but income vs debt is the more relevant metric for your ability to pay back the loan. In most cases, lenders will not let you borrow more than 90% of a property's value. Sometimes it could be much less. That is why it is important to ask up front how much a potential lender will be able to provide as you set out to begin your property search.
3. What is my rate?
It is vital that you ask the mortgage lender about the interest rate you would be paying on your loan. The interest rate is determined by multiple factors, including your credit score, the location of the home you purchase, the size of your down payment and your loan type, term and amount.
Just as in the section above, there can be some variance among lenders regarding your potential rates. Make sure this is all straightened out before moving forward.
4. How much do I need to put down & how does that affect my terms?
You may assume a 20% down payment is needed to buy a house. This is the figure used in order to avoid paying Private Mortgage Insurance (PMI).
But PMI aside, believe it or not, you can buy a home with as little as 3% down. Certain types of government-backed loans even allow you to get a mortgage with 0% down. However, the lower down payment on a loan may have drastic effects on the interest rates and other conditional factors of the lender agreement.
5. How soon can we close?
According to recent statistics the national average time to close on a home is 49 days. But some buyers actually close in 30 days or less, though you would need to have a very straightforward mortgage application. Which is why this is such an important question. Get a clear answer from the lender on how long it would take to close so your timeline can be planned accordingly once a deal is made with a seller.