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Six Questions to Ask Mortgage Lenders

A home is likely the biggest purchase you will ever make. A mortgage with favorable terms can give you the peace of mind you need to enter homeownership with confidence. 

In some ways, a mortgage lender is your partner in your real estate purchase, so as with any other decision, you want to be informed before entering into a deal. When you're in the market, keep these questions in mind. 

1. Ask About Rates 

Lenders now need to provide borrowers with comprehensive loan estimates that break down the cost into your rates and fees. Ultimately, your interest rate will be dependent on factors like loan terms, length, and your financial picture. 

 2. Ask About Closing Costs 

Inclusive in your fees will be factors like closing costs, or what the lender and real estate professionals charge for their services. Again, your loan estimate will provide you with an idea of what to expect with these costs. 

 3. Ask About Terms 

Depending on your financial situation, you'll choose between a fixed or adjustable rate mortgage (ARM). With the former, the interest rate on your loan won't change throughout the life of the loan without a refinance. On the other hand, the interest rate on an ARM typically starts out low, increasing at a pre-determined schedule to higher amounts. 

 4. Ask About The Down Payment 

Depending on the amount of capital you have, the down payment can change the terms of your loan substantially. A lesser down payment will typically result in higher interest rates, whereas a higher down payment will typically get you a preferable rate. Keep in mind that when your down payment is less than 20%, you may be on the hook for getting private mortgage insurance, which increases monthly payments. 

 5. Ask About Qualifying Requirements 

Depending on your financial situation, you may be able to qualify for better terms. Lenders will typically have basic items that they ask you for, such as any assets you hold, and whether you have steady employment and income. Your credit score will also be a factor in determining your rate and what kinds of loans you will qualify for. You'll also likely have to provide supporting documentation for your responses. These can mean pay stubs, bank statements, previous tax returns, and a host of other documents. Overall, lenders are looking to make sure you are financially sound enough to take on the additional debt. 

6. Ask About Timelines 

You'll want to find out how long it takes the lender to approve your loan application. Typically, larger lenders and banks will have faster turnaround, while individual lenders may not have the manpower to do so. The Consumer Financial Protection Bureau has recently introduced a new set of regulations which professionals call TRID. These require lenders to stick to more streamlined timelines in order to reduce closing delays...