Let’s be honest, it’s much more fun to look for homes online and through apps than it is to research home loans, or find the right mortgage broker. After all, what is there not to like about house hunting – you get to stroll through beautiful homes and picture yourself as the homeowner. However, if you’re like many other new homebuyers, you don’t know where to start or what type of questions to ask your mortgage broker. It might be surprising, but many homebuyers don’t shop around for mortgage lenders, yet they assume that the first ones they get in contact with are the best choice. However, it’s essential to shop around and find the best mortgage lender that fits your needs. With that in mind, here are five questions to ask your mortgage broker before buying your dream home.
1. What is the interest rate?
Your lender will offer you an interest rate based on the loan and your credit. The interest rate, along with the mortgage balance and loan term, will determine your real monthly payment. A mortgage loan with a lower balance or a lower interest rate will make a smaller monthly payment.
Your credit score is one of the tools used to determine your annual percentage rate (APR). Typically a higher credit score will make for a lower interest rate, while a low credit score will make for a higher interest rate. Interest accrues over the lifetime of the loan, and with the average mortgage lasting 15 years, you want to make sure your rate is affordable.
2. What is your process for pre-approval and closing?
Ensure that the lender’s timeline matches your home buying goals. What information will your lender need to pre-approve you for a home loan? Ask how long the preapproval will be valid. Typically it’s between 60-90 days. Ask about the lender’s closing process. Where will it take place? Do they work with a particular law firm or do they do it in-house? Some lenders make it convenient to close at your home or online.
3. What will be my down payment requirement?
Your minimum down payment will depend on the type of mortgage loan your broker recommends for you. It’s important to speak about what you have saved, how much you’d like to put down and your goals for the monthly payment.
Good news, the 20 percent down is no longer required today. Several mortgage loans range from 3 to 5 percent and for first-time home buyers. FHA loans are one of the most popular types of mortgage loans to have. With a 3.5 percent minimum down payment, most first-time home buyers find this more accessible and affordable. And, if you are a Veteran or a member of the military, you have access to VA loans which offer zero percent down. With most mortgage loans that require a relatively low down payment, a minimum credit score of 620 is required.
4. What fees will be included in my loan and what fees will be due at closing?
Lender fees will be associated no matter what loan product you choose. They include origination fees, the cost of writing the loan and closing costs. Fees are almost as significant as your interest rate. However, there are many ways to lower your interest rate.
Your lender should provide you with the Loan Estimate and the Closing Disclosure to help you understand your fees. You also get three business days to review your Closing Disclosure and ask questions before you close on the mortgage.
5. Is the mortgage fixed rate or an ARM?
Fixed-rate loans keep the same rate for the life of the loan, which can range between 10 and 30 years. Adjustable-rate mortgages, or ARMs, have interest rates that change after an initial period at regular intervals. If you don’t plan on staying in your home long-term, a hybrid ARM with an initial fixed-rate period may be a better choice.
If you don’t consider an ARM, make sure you ask and understand when the rate will change and by how much it will increase. Ask how often the rate will change after the initial interest rate change, the index that it’s tied to, and the loan margin.
First-time homebuyer? Let Emmanuel St. Germain from Choice Mortgage Bank guide you!
We know that finding the right mortgage loan for your home involves a lot of researching and can take the fun out of home buying, but look no further than Choice Mortgage Bank to help ease the process and help you understand the paperwork that’s tied to buying a home. Visit our website, or call us today at (561) 362-8441 to find out how we can make the process of applying for a loan simpler!