It’s easy to get nervous about something as big as applying for a mortgage. What is not so easy is putting our minds at ease if you’re in the middle of the process and things aren’t going the way you thought they would. Here is a list of questions you can ask your loan officer before you begin the process to help you prepare for what’s ahead.
- What are the steps and process for getting a loan approval?
To avoid any delays or surprises, be sure your loan officer takes the time to clearly explain the process and the steps from application to closing.
- Interview your loan officer.
Be sure he or she is someone you trust and feel comfortable working with. Ask about their experience with your loan type. Be sure you explore all the loan programs with your loan officer to determine that you are selecting the best choice for you.
- What are the total fees / costs associated with the loan?
Borrowers pay fees at closing for services provided by the lender and other parties, such as title companies. Be sure you have a full understanding and a breakdown of all costs you will incur from application to closing. You should also be made aware of any out-of-pocket expenses you will have associated with the loan (i.e. appraisal fees, homeowners insurance, etc.)
- Lenders may also charge discount or origination points. One point is equal to 1 percent of the loan amount. (i.e. on a $150,000 mortgage, one point would be a fee of $1,500 added to your closing costs.) Discount points reduce the interest rate or are used to buy the rate down. They are prepaid interest and are typically tax-deductible. Origination points are fees charged by the lender to cover the costs of originating the loan. Ask your loan officer if this will apply to you.
- When can I lock the interest rate?
Interest rates can and do fluctuate. To prevent risking a higher rate, you can lock in your rate based on the market the day of locking. Locks are based on a set time frame, typically 30, 45, or 60 days. Shorter term locks typically offer the best pricing. Because the rates can change daily based on market, it is always your decision when to lock in your rate. Ask your loan officer about how you can lock in the best rate.
- Is there a prepayment penalty on this loan?
Be sure you ask up front if your loan has a prepayment penalty. Some lenders charge a penalty if you prepay on the mortgage. Some apply only when you refinance or reduce the principal balance by more than a certain percentage.
- What is the minimum down payment required for this loan?
Be sure to explore your options regarding down payment. The bigger down payment might mean a lower interest rate and better loan terms. With a down payment of less than 20 percent, you will likely have mortgage insurance (PMI) that will either increase your monthly payment or your rate. By exploring your options you may also find that there is a program that will allow you to not have to make a down payment and keep those funds for reserves.
- What documents will I have to provide?
Your loan officer should be able to provide you a list of required documents. Understand the documents requested are required per federal lending guidelines and the sooner you provide those documents to your loan officer, the better they will be able to direct you. Most Lenders require proof of income and assets, including bank statements, tax returns, W-2 statements and recent pay stubs. More may be required based on your individual situation.
- How long will it take to process my loan application?
There are a lot of moving parts to getting a mortgage from application to closing. The timeframe can vary based on the type of loan program and all the parties involved responding to requests in a timely manner. Purchase offers are typically written with closing dates anywhere from 30 to 60 days from accepted offer date. As soon as you have an accepted offer, be sure you are notifying your loan officer right away to keep things rolling. Your loan officer should be able to provide you an estimated time line along with frequent updates on status so you know you are on track for closing on time.
- What can I do to ensure a timely closing?
Keeping your loan officer informed that you are writing an offer and provide updates until the offer is accepted. Responding to your loan officer in a timely fashion is important. Asking what else you can do to keep the process moving along can help things go more smoothly.
- What might delay approval of my loan?
Be sure you are up front with you loan officer, one of the things that can slow the process is when information is uncovered that was not known at the time of application. If a job change, a decrease in salary, a new debt, a change in your credit history, or a change in marital status happens during the loan process, it is imperative that you communicate this with your loan officer as early in the process as possible so they can assist you in avoiding any delays. The best way to avoid that is to put your financial life in a holding pattern until you reach the closing table.
Remember, you and your loan officer are on the same team, working together to get you into your new home as quickly and smoothly as possible.