Before you start your home search, you will want to sit down with a lender, get your finances in order, determine how much you can afford, and get a pre-approval. However, if you have never bought a home, this step may seem daunting because you have no idea what half this stuff means. So here are 5 questions to ask your lender to make sure you understand the process and are getting a mortgage you are happy with.
What type of mortgage do you recommend?
Conventional? VA? FHA? What is the difference? While a FHA loan will usually allow you to put less money down and offer a slightly lower interest rate, a conventional loan won’t require private mortgage insurance, potentially making it a better option. Differences such as these are why it is so important to talk with your lender about the difference of each mortgage they recommend – including the benefits and drawbacks – to determine which one is best for you.
What will my downpayment be?
Of course, you need to know how much money this is going to cost you up front. However, it is also important to understand how much flexibility you have with that, particularly in a competitive market that sees multiple offers.
What is my interest rate and APR?
This number tells you how much a mortgage will cost you over the life of the loan. The higher the interest rate, the money money you are paying to borrow. While applying for a loan, it may be wise to shop for the best interest rate.
How long can I lock my interest rate in for?
Once your interest rate is locked in the time starts ticking. If you lock your interest rate in, make sure you know how long you have before the lock expires to ensure you do not have to pay a rate lock extension fee.
What will my closing costs be?
While not all closing costs are directly related to the lender – such as title fees and recording fees – a large portion of your closing costs as a buyer will be dictated by the lender. This will vary from lender to lender, so while shopping, make sure you consider.