Knowing what questions to ask your lender during or before the loan application process is essential for making your mortgage approval process as smooth as possible.Many borrowers fail to ask the right questions during the mortgage pre-qualification process and end up getting frustrated or hurt because their expectations were not met.Here are the top eight questions and explanations to make sure you are fully prepared when taking your next mortgage loan application:
1. What documents will I need to have on hand in order to receive a full mortgage approval? An experienced mortgage professional will be able to uncover any potential underwriting challenges up-front by simply asking the right questions during the initial application and interview process.Residence history, marital status, credit obligations, down payment seasoning, income and employment verifications are a few examples of topics that can lead to stacks of documentation required by an underwriter for a full approval.There is nothing worse than getting close to funding on a new home just to find out that your lender needs to verify something you weren’t prepared for.
2. How long will the whole process take?Between processing, underwriting, title search, appraisal and other verification processes, there are obviously many factors to consider in the overall time line, which is why communication is essential.As long as all of the documents and questions are addressed ahead of time, your loan officer should be able to give you a fair estimate of the total amount of time it will take to close on your mortgage.The main reason this question is important to ask up-front is because it will help you determine whether or not the loan officer is more interested in telling you what you want to hear vs setting realistic expectations.You should also inquire about anything specific that the loan officer thinks may hold up your file from closing on time.
3. Are my taxes and insurance included in the payment?This answer to this question affects how much your total monthly payment will be and the total amount you’ll have to bring to closing.If you include your taxes and insurance in your payment, you will have a higher monthly payment to the lender but then you also won’t have to worry about coming up with large sums of cash to pay the taxes when they are due.
4. Will my payment increase at any point after closing?Most borrowers today choose fixed interest rate loans, which basically means the loan payment will never increase over the life of the loan.However, if your taxes and insurance are included in your payment, you should anticipate that your total payment will change over time due to changes in your homeowner’s insurance premiums and property taxes.
5. How do I lock in my interest rate?It’s good to know what the terms are and what the process is of locking in your interest rate.Establishing whether or not you have the final word on locking in a specific interest rate at any given moment of time will alleviate the chance of someone else making the wrong decision on your behalf.Most loan officers pay close attention to market conditions for their clients, but this should be clearly understood and agreed upon at the beginning of the relationship, especially since rates tend to move several times a day.
6. How long will my rate be locked?Mortgage rates are typically priced with a 30 day lock, but you may choose to hold off temporarily if you’re purchasing a foreclosure or short sale.The way the lock term affects your pricing is as follows: The shorter the lock period, the lower the interest rate, and the longer the lock period the higher the interest rate.
7. How does credit score affect my interest rate?This is an important question to get specific answers on, especially if there have been any recent changes to your credit scenario.There are a few key factors that can influence a slight fluctuation in your credit score, so be sure to fill your loan officer in on anything you can think of that may have been tied to your credit.
8. How much will I need for closing?*The 2010 Good Faith Estimate will essentially only reflect what the maximum fees are, but will not tell you how much you need to bring to closing.Ask your Loan Officer to estimate how much money you should budget for so that you are prepared at the time of closing.Your earnest money deposit, appraisal fees and seller contributions may factor into this final number as well, so it helps to have a clear picture to avoid any last-minute panic attacks.