If you’re shopping for a new home, be sure to ask your mortgage lender plenty of questions. Asking the right questions will help determine which loan and terms work best for your individual situation.
Your mortgage is likely the biggest financial commitment of your lifetime, so it’s essential to get it right. With some careful planning, you can avoid common mortgage errors and keep costs low.
1. How long have you been in business?
Gain the edge over your competition by asking the right questions. Before signing any mortgage contract, it’s essential to have a comprehensive understanding of all available loan options and costs. Doing this ensures you don’t end up with something unsuitable for you or worse yet, won’t meet long-term family needs. Plus, with most brokers you’ll likely get an individualized quote tailored specifically to your circumstances and financial objectives. Whether looking to purchase or remortgage a current residence, an experienced broker is ready to answer all questions regarding mortgage rates and more; contact one of our mortgage experts now!
2. What type of loans do you offer?
When buying a home, it’s essential to make sure the mortgage you select meets your individual needs. With hundreds of lenders available, it can be challenging to know which one best meets your requirements.
That is why it is wise to inquire your broker about the loans they provide. Doing this will enable you to find a lender who can provide you with an appropriate loan type and terms tailored specifically for your situation.
Another useful question to ask your mortgage broker is about any down payment assistance programs available in your area. These could include grants, forgivable second mortgages and savings match programs.
3. What is your fee?
If you’re thinking of working with a mortgage broker, it is beneficial to understand their fees structure. Like all financial services professionals, brokers must adhere to federal regulations and disclose all fees upfront.
By law, brokers cannot be paid by both you and the lender simultaneously; nor can their fee be tied to the interest rate on a loan. This helps prevent brokers from pushing borrowers into expensive loans in order to boost their own profits.
A reliable mortgage broker will have access to various lenders and products, helping you find the perfect loan. They may even provide multiple quotes from different lenders so that you can compare costs and find which option is most advantageous for your particular situation.
4. What is your fee structure?
In the business world, a fee structure is an organized chart or list outlining the rates on various products and services provided by a business. It can be an effective means for attracting clients, enabling customers to compare items, and determining the cost associated with an activity.
Businesses must carefully consider which fee structures to implement in order to provide high quality products or services and earn a healthy profit. Businesses have several options when it comes to fee structures; from fixed fee models to hourly charges or subscription based models.
Selecting the ideal fee structure can be a challenge for some business owners and entrepreneurs, yet it is an essential component in order for any firm to prosper.
5. What is your fee structure for refinancing?
Refinancing is an excellent way to reduce your mortgage payment and free up cash for home improvements or debt repayment.
However, refinancing involves various fees, such as origination and application charges. You can get all of the details about these costs by reviewing your loan estimate.
Fees charged by lenders can have a significant effect on your loan costs. Some fees may even be waived or reduced through negotiation, so make sure to ask!
On average, refinancing a mortgage can cost between 3% and 6% of your remaining balance. If your credit score has changed since you last refinance, this amount could rise significantly.
6. What is your fee structure for a fixed rate mortgage?
Before you decide on a mortgage, it’s essential to understand what will be included in your payment. Lenders must provide you with an exact breakdown of costs associated with taking out a loan, known as a Loan Estimate, within three business days after applying.
The estimate should include a breakdown of all lender fees, so be sure to inquire about them.
It’s especially crucial if your mortgage lender charges an origination fee, which could amount to as much as 1% of the loan’s value. Some lenders are willing to negotiate these costs with you.
Another factor to consider is whether you want a fixed rate or adjustable rate mortgage (ARM). An ARM offers you the potential of lower interest rates, but can be riskier than a fixed-rate mortgage. A fixed-rate loan provides stability in monthly payments as well as an established interest rate.
7. What is your fee structure for an adjustable rate mortgage?
You should inquire with a mortgage broker about the loan estimate, which outlines all costs associated with your loan – including any closing expenses. Lenders must provide this document within three business days of receiving your application for credit.
An adjustable rate mortgage (ARM) is a loan type with an initial fixed-rate period and then adjustments at specified intervals. It could be for a short-term need or last for several years.
Home buyers with long-term plans should consider an ARM. However, be aware that your payments may increase if interest rates adjust over time.
Furthermore, payment caps on ARM loans may lead to negative amortization – meaning your payments don’t cover enough principal to cover your loan obligations – placing you at risk for foreclosure.
8. What is your fee structure for a reverse mortgage?
A reverse mortgage is a loan that uses the equity in your home to help you live independently. Just like traditional mortgages, it comes with fees and closing costs as well as variable interest rates that could change at any time.
To ensure you understand all costs involved with a reverse mortgage, consult with a Loan Officer who specializes in this area. They’ll guide you through each step and ensure it’s the best option for your individual situation.
Fees for a reverse mortgage are broken down into origination and title fees, as well as an HECM counseling fee that must be paid out-of-pocket. Some lenders will include these costs into your loan; however, according to the Consumer Financial Protection Bureau it’s best to confirm with each lender before signing on the dotted line.
9. What is your fee structure for a jumbo mortgage?
If you’re searching to purchase a home worth more than the conforming loan limit of $726,200 (single-family homes in most areas) or $1,089,300 in high-cost regions, jumbo mortgages may be an option. However, they aren’t automatically approved and require more thorough approval processes than conventional loans.
Borrowers typically must meet strict debt-to-income ratios and demonstrate they have enough funds in the bank to cover at least one year’s worth of payments. Furthermore, they may need to submit extensive documentation such as tax returns or W-2s in addition to bank statements.
Broker fees, including lender commissions, can range anywhere from 1% to 2% of the loan amount and are typically included in the costs associated with a jumbo mortgage. Be sure to inquire about these charges prior to beginning your application process.
10. What is your fee structure for a construction loan?
Construction loans are specialized mortgages designed to cover the costs of constructing your new home. They require more work from the lender than traditional loans and may have additional requirements.
Lenders typically approve construction loans for those with good credit scores and a down payment of 20% to 25% of the construction costs. They’re also looking for a low debt-to-income ratio – meaning you earn enough income to cover other bills as well as loan payments on your construction loan.
Similar to a regular mortgage, a construction loan disburses money to the contractor in stages, so the project moves along as scheduled. These distributions are known as draws and typically coincide with major milestones like laying foundations or framing your home.