If you’re looking to buy a house, don’t forget about these 7 questions to ask a mortgage lender (and lenders, here’s how to answer them)
If you’ve ever bought a house, you know that there are many questions floating around in your head. You have questions for the realtor and the inspector. You have questions about sales process and what the taxes will be like. You wonder if the school system will be like in years to come.
If you work in the mortgage industry, you understand how confusing this time can be for your clients. You’ve likely been asked these questions so many times that you have a prepared speech answering these questions before they can be asked. Whatever you do, don’t forget to discuss these questions with customers who may not know to ask them.
We’ve put together a list for you of seven questions to ask a mortgage lender while looking for a home. If you’re a mortgage lender, consider using this list as a guide to lead your client conversations.
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1. How do I qualify for this loan?
All mortgages are different, and some requirements depend on your income, employment, and credit history. Other factors mortgage lenders will consider include assets and any liabilities you may currently have. There are certain programs that will have their own requirements that you’ll need to qualify for. These include: first-time homebuyer programs, new construction loans, V.A.loans, and other government-sponsored programs.
If you’re a lender, consider discussing different loan types to your clients even if they fail to ask. If they are aware that they qualify for various loans through you, but only a standard mortgage through another lender, they might bring their business to you because of the multiple opportunities.
2. What is the interest rate, and how can I lock it in?
When you first started looking at homes you probably did a lot of research on mortgage interest rates. It’s good to have an idea of what rates are in your area, but remember – rates change quickly! Immediately after your sales offer has been accepted, contact mortgage lenders in your area and request information on interest rates. Choose the most competitive rate.
Because rates fluctuate so often, ask your lender if you can lock in the rate discussed when you first apply for the mortgage. Don’t forget to ask if lock fees will apply.
Lenders, when discussing rates with new leads, use the locked rate as a sales tool. You might just get a new client if you can confirm their rate will not change!
3. Will I have to pay any points on the mortgage?
One thing that will influence the interest-rate competition is whether or not you’ll be required to pay origination or discount points on your mortgage loan to achieve that specific rate. Sometimes it’s beneficial to you to accept points up front. It might save you money on the overall length of the loan period or it might not! Do your research before agreeing to any mortgage terms.
As a lender, you know that sometimes people aren’t even aware of points, and how they can use points to change the offered interest rate. Educate your leads right away, especially if you believe that paying for points will benefit them in the long run.
4. What type of down payment will I be required to make?
The interest rate and loan terms are calculated based on the amount of money you choose to put down as a down payment. The typical down payment ranges between 3 to 20 percent of the purchase price. Some specialized loan programs even waive a down payment if you qualify by their terms. If you are unable to put a down payment or choose to do only a small percent of the purchase price, you’ll pay additional costs for items such as private mortgage insurance. If you’re able to offer a high down payment, try negotiating terms or even lower interest rates.
Since the down payment amount is generally one of the first questions you’ll ask of your leads, educate them on all possibilities. They may choose to include a lower or higher down payment based on what you can offer them.
5. What are the closing costs?
Because mortgages come with various fees, find out what the amount of those fees will be immediately. A mortgage lender is required to give you a documented good-faith estimate of closing costs within three days of receiving your application. Since closing costs – full or partial amounts – are sometimes included in the purchase-and-sales agreement, knowing the actual cost up front will allow you to budget for immediate out-of-pocket expenses.
As a mortgage lender, if you find out closing costs will change after your good faith estimate is submitted, it would be best to bring it to your client’s attention immediately. Since liquid cash may be tight when purchasing a home, it’s best to be up front immediately than risk any issues closer to closing.
6. Is there a penalty for prepayment on this loan?
If you’re financially-savvy, you might be interested in paying off your loan earlier than the term you applied for. For example, if you have a 30-year loan, your goal might be to pay it off in 25 years by making extra payments. Some mortgage terms have a prepayment penalty clause where you will be charged a certain percentage or amount if you pay off your loan early or sell your home in a particular time period. Find out if this clause is included in your mortgage. If you’re not considering paying the loan off quickly or selling, having a clause like this might benefit you by possibly lowering your interest rate.
Lenders, discuss this, and any other possibly alarming terms, to your clients before contracts are signed.
7. How long will the loan application process take and what would delay approval?
Of all the questions to ask a mortgage lender, this one may be the toughest to answer since so many outside variables influence the mortgage process. However, this is still a very important question to ask because the seller will want to know how long the house will take to close. Many mortgage lenders will quote from a timeline between two weeks and up to two months. Complete any materials requested of you to expedite the process, and be patient, as backups happen.
Delays occur when change happens between the time the application process begins and is approved. Notify your mortgage lender of any changes they would consider important, such as a new job, salary increase or decrease, marital-status change, or additional debt (like school loans) incurred. Also, delays happen when inaccurate information is shared on the loan origination paperwork. It’s never a good idea to fudge any information when requesting a mortgage. The more complete and honest your application is, the better your lender will be able to do his or her job.
The same type of respect should be given to clients. If you’re a mortgage lender, and you’re aware of any delays in the process, communicate them with your customers. The better updates all parties receive, the smoother the process will be.
While you’re busy searching for the best mortgage or providing them to your clients, Blitz can be managing your incoming leads for you.
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What other questions for mortgage lenders do you have? Let us know in the comment section. If you’re a mortgage lender, share this post with your customers!