Now that you’re taking steps to get a mortgage and purchase a property, it’s important that while your mortgage broker may have endless questions for you, you also should not hesitate to ask them questions.
You want to ensure that you understand the loan process, all costs, and loan product specifications you are signing up for before making any commitments.
To help you prepare for conversations with your mortgage broker, we have compiled a list of some of the crucial questions to ask – and why you should ask them.
What type of loan is best for me?
A broker has access to a portfolio of loan products from different lenders. After they have reviewed your financial circumstances, they should be able to guide you to the best loan for you. Loan types include conventional, unconventional, USDA, and FHA loans.
If you have any preferences or concerns over a specific type of loan, this is the best time to voice them.
What are the current market interest rates? And what direction to expect interest rates to move in the next quarter?
Interest rates are quickly changing. So if you’re not ready to get a loan now, it’s important to understand the current rates and where they might be when you’re prepared to lock in your purchase.
What are my loan’s interest and annual percentage rates (APR)?
No, they are not the same thing. Loan providers calculate APR in different ways, but it’s important to know that this rate doesn’t just include your interest rate but fees and closing costs.
What does it mean to buy discount points? And should I buy them?
Buying points is a strategy to decrease the interest rate on your mortgage. Deciding whether you should buy points depends on the loan product, how long you plan to own the property, and whether or not you plan on refinancing soon.
How large of a down payment do I need? And do I need more money on top of the town payment to cover any additional costs?
Get a clear understanding of just how much cash you need to bring to the table. For example, if your down payment requirement is 10%, remember there will likely be additional costs. So don’t get caught off guard when closing approaches. Instead, get a clear understanding of all the costs upfront.
How much time do you need to process and fund the loan?
This is an important question when it comes to your offer-making. When making an offer, you need to ensure that the escrow period is long enough to cover the time the mortgage broker and lender need to process your application, obtain an appraisal, and fund your loan. In addition, you should convey this time frame to your real estate agent so they know the time requirement when advising you on offers.
These questions are just the tip of the iceberg. Most borrowers only get a mortgage a couple of times in their lives, so good mortgage brokers know they will have tons of questions and will be happy to answer them.