Unless you plan to pay cash, you’ll need to shop for a mortgage before you hunt for your new home. With so many lenders out there, it can be intimidating to make this decision. There are several questions to ask when choosing a mortgage lender so that you can feel confident in the process.
To start your home search and to get trusted mortgage referrals, contact Julia Monaghan Real Estate. We have the expertise to guide you in any market to your perfect home. Reach out today to get started.
Think About Your Specific Situation and Wishes
Your home is likely to be the biggest purchase you’ll ever make, and most homebuyers need a mortgage to make it happen. With so much at stake, you need every fact possible to help guide you to the right choice.
You probably have a wide range of questions as you start this journey, so take some time to write down anything that comes to mind. In particular, make notes about any special circumstances that you want to discuss with a lender. For example, or you a first-time buyer? Are you looking at rural property? Do you have access to a VA loan?
There are many mortgage lenders out there, so finding the right fit can take a little time. You might be most comfortable working with a bank you already use. Or maybe you want to find a broker who isn’t tied to a particular loan product.
Essential Questions To Ask When Choosing a Mortgage Lender
As soon as you mention that you’re buying a house, you will probably receive lender referrals from everyone you know. But the right fit for your cousin isn’t necessarily the right fit for you. Make sure to talk to at least three lenders before you make a decision.
And if you feel stuck, connect with us at Julia Monaghan Real Estate. With years of experience working with different firms, Julia has a knack for matching a buyer with just the right lender.
Your lender should generate a pre-approval letter for you to have on hand during your house hunt. This document shows sellers that you are ready to buy and have financing ready to go.
When interviewing mortgage lenders, here are some crucial questions to ask.
1. What Types of Mortgages Do You Offer?
Your lender is likely to have a variety of loans available and will suggest the best option for your circumstance. If you choose to go through a broker rather than a specific financial institution, you may have more choices.
- Conventional loans tend to be the least expensive overall, but they require money down and a strong credit history.
- Jumbo mortgages are like conventional loans, but bigger. For 2021, the maximum conventional loan was just under $550,000 in most of the country. Jumbo loans are a great choice for people buying in expensive markets.
- FHA loans are government-backed mortgages. They require less money down and allow for a lower credit score. The downside: you will probably pay private mortgage insurance (PMI) until you pay off or refinance your loan.
- VA loans are only available to eligible members of the U.S. military. For people who qualify, VA loans do not require any down payment and do not include PMI. However, there is a funding fee, which could be 1.4-2.5% of the total loan amount.
By taking time to discuss your circumstances with a lender, you allow them the chance to determine the best loan option for you. There are many programs available, and an experienced lender will find you the best fit.
2. Am I Eligible for Any Down Payment Assistance?
As you discuss loan package options, be sure to ask the lender about down payment programs. This may be one of the most important questions to ask when choosing a mortgage lender. There are many ways that buyers can qualify for help with their down payments.
Some opportunities are well-known, such as through the VA. But others you might not know about without a lender’s expertise. For example, there may be programs that help with down payments for:
- First Responders
- First-Time Buyers
- Farm Property
- Physicians and Nurses
- Property in Economically Depressed Regions
Share as much information as possible when you interview lenders so that they can help you find applicable assistance programs.
3. What Interest Rate and APR Do I Qualify For?
Interest rate and annual percentage rate (APR) may sound like the same thing, but there is a difference.
The interest rate shows the annual cost of your loan. This percentage helps determine your monthly payment. The APR is a calculation that tells you the cost of your loan with the lender fees included. The larger the difference between the interest rate and APR, the more fees you’re paying.
When choosing a mortgage lender, ask questions about the difference between these two rates. The Federal Truth in Lending Act requires lenders to publish both rates so that buyers can compare loans easily. This information is a critical piece when you are deciding which lender to use.
4. Do You Offer a Mortgage Rate Lock?
Interest rates fluctuate regularly based on moves by the federal government. Talk with potential lenders about the option of locking in a current rate to protect yourself if the rates rise before your closing day.
Often, there is a fee to do this, so make sure you get clarification from the lender. In addition, ask if they will honor a lower rate if it drops before you close on your home.
5. What Closing Costs Do You Charge?
All mortgages have closing costs, but lenders vary on how much they charge and who pays them. Closing costs for an average conventional loan are usually 2-5% of the loan value.
When choosing a mortgage lender, ask about the expenses you will need to pay beyond your home purchase price. They should give you a written statement detailing:
- Appraisal Costs
- Origination Fees
- Application Fees
- Attorney’s Fees
- Mortgage Broker Fees
- Title Insurance
- Mortgage Insurance Fees
This information is a crucial part of comparing mortgage lenders. Different lenders and mortgage products have varying closing costs, so it’s essential to see how they line up when making your choice.
Now For The Fun Part. Let’s Find Your New Home!
As important as your lender is, it’s equally crucial to find a realtor you trust. You deserve an expert agent who is always looking out for your interests. Whether you are the buyer, seller, or both, an experienced real estate agent is critical.
Contact Julia Monaghan Real Estate today to begin your home buying or selling journey. We are happy to help with all of your real estate needs. Contact Julia today to connect. We serve clients in the Portland Metro area, including West Linn, Happy Valley, and Lake Oswego. We can’t wait to meet you!