Important Questions to Ask Your Mortgage Lender

According to a new survey from Fannie Mae, Americans are still quite confused about the mortgage process. And, with thousands of lenders offering countless loan programs all with different income and credit requirements, it’s no wonder hopeful homebuyers are left scratching their heads.

The good news is that the mortgage experience doesn’t have to be a stressful one. The first step is to align yourself with an expert who can help you navigate the process. But selecting the right mortgage professional requires some due diligence on your end. Here are some important questions to ask when searching for your lender match.

What loan is best for me?
A conventional loan or a government-backed program? A fixed-rate or an adjustable rate? A 30-year term or 15? These are all questions your lender can answer in time, but a reputable lender will find out more about you before they discuss the options.

While it’s important to ask questions of your lender candidates, it’s just as important that they ask questions of you. Nick Starr, mortgage banker with Stockton Mortgage Corporation, says a professional lender should not only be able to tell you which program is best, but he/she should also tell you why.

“A professional will explain all the pros and cons of the programs and why one would fit your needs better than the others,” he said. “When lenders take time to truly understand a borrower’s financial situation and educate them on the options, it helps them feel more confident and comfortable with the process.”

What are all of my costs?
When dealing with one of the biggest financial transactions of your life, hidden fees and unexpected costs are the last thing you want. To avoid surprises, Starr says consumers should be asking their REALTOR^® and lender about all transaction costs.

“Many homebuyers know they need a down payment of some sort, but they aren’t familiar with the other potential costs,” he said. “There are also possible expenses like the earnest money deposit, inspection fees, closing costs, etc. And some lenders require application fees that cover the appraisal and credit report.”

As far as mortgage fees, your loan estimate will explain everything in detail, including loan terms, projected payments, closing costs, comparisons, and other considerations. Lenders are required to provide a loan estimate to borrowers within three days of receiving a mortgage application that includes a property address. Keep in mind this document is not an approval or denial of a loan, but rather an explanation of estimated costs and fees associated with obtaining a mortgage.

How much can I afford?
Just because you’re pre-approved for a certain amount doesn’t necessarily mean that’s what you should spend.

While lenders qualify you for what you can technically afford based on the hard numbers, they don’t know how you spend your disposable income. A responsible lender will ask you about your lifestyle and budget to help ensure you don’t bite off more than you can chew.

Can I finance a fixer-upper?
Starr says this is a question a lot of buyers don’t think to ask, but in a fast-paced seller’s market, you may want to know the answer.

“Move-in ready homes are going pretty quickly, so if you can’t find exactly what you’re looking for, you may want to expand your search to include something that needs a bit of work,” he said. “There are mortgages out there that allow you to include renovation costs with the purchase, so if that’s something you’re interested in, ask your lender about the options.”

What documents do I need?
Having the right financial paperwork can prevent potential hold-ups in the mortgage approval process. While there are standard documents that most lenders require, there may be some additional paperwork requested depending on your situation. A professional lender will walk through the necessary paperwork, which could include things like paycheck stubs, W2s, tax returns (both personal and business), bank statements, investment statements, retirement statements, etc.

How much time will it take to complete the mortgage?
The average loan processing time period generally    falls between 21 and 45 days. But some loans can take longer to process. With an FHA loan, for example, the transaction may take 30 to 60 days since the house must first pass an inspection required by the U.S. Department of Housing and Urban Development. So, be sure to ask your lender about the anticipated turnaround time and also find out what obstacles could potentially hold up the closing.

Other important questions for your lender include: Do you charge for an interest rate lock? Do you do the underwriting in-house? Do you participate in any down payment assistance programs? And, how do you communicate with your clients? Finding out the answers to these questions will help determine which lender is right for you and help ensure you have a successful and stress-free homebuying experience.

For a listing of local, trusted lenders, visit the Greater Lansing Association of REALTORS^® website at www.lansing-realestate.com.