When it’s time to apply for a loan, there are 12 important questions that you should ask your Wilmington mortgage lender or broker. The answers to these questions will help you gauge if you’re getting the best loan package for you.
- What is the best type of loan for me?
This seems to be a relatively straightforward question, but it takes into account a number of factors. Your lender will need to learn more about you, so they’ll interview you and gather all of the information they need to make an informed assessment, including: your credit score, current finances, debt-to-income ratio, and any potential changes that may affect your finances (job promotions, school tuition, and additional expenses).
- What is the interest rate on this loan?
In order to know what you’ll be paying over the course of time, ask for the annual percentage rate (APR). This will be a good way to compare to other lenders; however, beware that this is usually higher than the original quote, because it will include all of the lenders fees. This applies to advertised APRs, which are usually the lowest rate without fees included.
- What documentation do I need to apply?
You will need to provide proof of income and assets before you’re approved for the loan. Exactly what the lender and underwriter will accept may differ based on your individual situation, but for a good checklist, visit our blog “What Documents Do I Need to Apply for a Mortgage”.
- What are the requirements to qualify?
These can relate to your income, assets, credit history, and employment. VA loans, first time buyer, and government-backed home loan programs may their own individual requirements, some less strict than conventional loans.
- What is the required minimum down payment?
Since this is your upfront, out-of-pocket payment, it’s important to know right away what you could be paying. It’s also important to know that it’s possible to lower your rate and improve your terms if you put down a larger payment.
- How many discounts and origination points will I pay?
Discount points are a fee that you pay to lower the interest on your mortgage. This helps to lower the monthly payment and is good for anyone wanting to stay in their home long term. Origination points are charged to cover some of the cost of the home origination process, including your loan officer’s compensation. Typically, 1 point = 1% of your loan amount.
- Can I lock the interest rate and will it cost me anything?
Your interest rate may go up and down between the application time and the day of closing. Locking in that interest rate could save you money. Be sure to ask the lender if you can lock it in and if it will cost you anything.
- What are the closing costs?
Your lender will provide you with a Good Faith Estimate. This is a breakdown of all lender and third-party fees, including attorney fees, taxes, credit report, appraisal, title insurance, notary, loan origination, interest, insurance, and your down payment. The Real Estate Settlement Procedures Act requires every bank or mortgage company to give the buyer the estimate within three days of applying for the loan.
- Does the loan have a prepayment penalty?
Many loans have a penalty for paying them off early. This may be equal to 1% of the loan or 6 months worth of interest. You should know this if you plan on selling the home before the end of the mortgage, which many people do.
- How long will the loan application take?
Typically, it is 45-60 days, but this can vary according to the program and lender. It could be less. It could be more. The lender needs to verify all your finance and employment information, and order an appraisal on the home, which takes time. It’s important to remember this when setting a closing date in the offer to purchase.
- What could delay approval of the loan?
If you give completely accurate information, the application process should go smoothly. However, approval could be delayed if the lender discovers a credit issue in your report, or you lose your job, change your marital status, or take on additional expenses. Also see the video: Important Information for Buyers About Their Credit Report.
- What is your track record?
In order to feel assured you are working with a competent and informed lender, ask them about their past track record. A confident lender will be happy to provide testimonials from past clients. Also, ask them how they’ve done with past situations like yours. For instance, have they ever run into hitches with FHA or VA loans, and how did they handle them?
These 12 questions are sure to leave you feeling more confident in your loan choice. They’ll help you compare different loan options and mortgage lenders, and leave you well informed for the application process.
We’ve worked with many Wilmington lenders and would be happy to refer you to a competent and trustworthy professional. Just give us a call at 910.202.2546 or send us a message through our Contact page.