Purchasing a home is likely the biggest asset you will ever acquire, and as such, it’s important that you ask the broker helping you finance it the right questions. Years of your life depend on the answers you get, so shopping around for a lender that is willing to put your best interests first is worth the wait. We have devised a list of the top 5 most important questions to ask your prospective mortgage lender. We encourage you to ask a ton of questions, so you get the information you need to make an educated decision!
1. Do I qualify for any down payment assistance programs?
If you really want to find out your mortgage lender’s value, this is the question that will provide clarity. Lenders with knowledge of local, state, and national down payment assistance programs—and who are willing to help you navigate the process—are well worth the hunt!
2. Which mortgage is best for me?
Are you a veteran? First-time homebuyer? Buying in a rural area? These are key indicators of what type of mortgage is best for you. A reputable lender will want to know you more to help assess the best type of loan for you, so don’t be afraid to give them enough information about your finances and personal circumstances. Remember, there are a ton of loans from a fixed-rate mortgage, an adjustable-rate mortgage, an interest-only loan, a negative amortization loan, and more!
3. What are all the costs?
You might not have considered lender fees, appraisals, credit reports, the title policy, pest inspection, escrow, recording fees, taxes, and more! Ask your mortgage lender what all the costs will be, and they will provide you with a document outlining an estimate of these fees.
4. How much of a down payment is required?
The first number that popped into your head was probably 20%, however, that’s not always a requirement. For example, VA Loans offer zero down, FHA loans require only 3.5% down, and Rural loans also allow for zero down! There are obviously pros and cons to this, so make sure to ask about all your options. One such con to this is that you’ll be paying private mortgage insurance if you put less than 20% down, meaning you’ll front the bill on more closing costs and an increased monthly payment until you reach the 80% loan-to-value ratio.
5. What is My Interest Rate and Annual Percentage Rate?
You were probably already planning to ask what the interest rate will be on your mortgage, as it is one of the core parts of the loan. However, did you know that a loan’s annual percentage rate (APR) includes the interest rate and all the other related lender fees divided by the loan’s term? This is a complex calculation, not all brokers compute it in the same way, and there is no way to calculate an APR rate for an adjustable mortgage accurately. So, be sure to ask your mortgage lender about pinning down the adjustment frequency if your interest rate is adjustable, as well as the maximum annual adjustment, highest rate, index, and margin.
If you are ready to purchase a home and would like to talk to one of our specialists, give us a call today at 703-297-4251.