Top 5 Questions to Ask a Potential Lender
Let’s make this easy. We have a million other thoughts running through our brains, so we will break it down to 5 Important questions:
1. What is the interest rate going to be on my loan? What additional fees can I expect?
It is important to know this, because banks do offer different rates/have different criteria. Your Loan Officer, should be able to direct you to the best loan type for your situation. It is also a good idea to ask how to lock this rate in, since rates can fluctuate quickly in this market. Be sure you get the full story on fees, such as application fees, appraisal fees and any processing fees.
2. What can I expect my closing costs to be?
Your lender is required by law to send you a loan estimate within 3 business days. This estimate will include the projected closing costs to help you know what to expect at the closing table.
3. What documentation do you need from me?
Be prepared to have your paperwork in order and complete. This helps to ensure the process is seamless, saving time and eliminating needless worry for the buyer. It can seem a bit daunting, but breaking it out bit by bit will help. Your most recent tax documentation, bank statements and recent paystubs as well as a list of any other debt, such as credit cards and student loans, will all be required.
4. Will I have to pay for Private Mortgage Insurance? If so what amount will that add to my monthly payment?
If you are planning to put down less than 20% of the loan, then yes you will have to have Private Mortgage Insurance (PMI). Your broker should be able to tell you the amount you can expect to add to your monthly payment. This helps plan for the future. Keep in mind that after you have paid off a certain amount, this PMI can be dropped and your monthly payment will be less. To remove PMI, or private mortgage insurance, you must have at least 20% equity in the home. You may ask the lender to cancel PMI when you have paid down the mortgage balance to 80% of the home's original appraised value. When the balance drops to 78%, the mortgage servicer is then required to eliminate the PMI.
5. What are the qualifying guidelines for this loan and how much can I afford to borrow?
It is important to know this in order to keep your expectations in check. There is a Poem out there called “In Acceptance Lieth Peace” …. In other words, when you know what you qualify for in advance, it will keep you from looking for homes outside of your budget. There is nothing worse than setting your sites on something and then learning you cannot afford it.
If you have any specific questions, please let me know I'd be happy to answer them for you!