What Questions Should I Ask My Mortgage Lender?

Individuals considering a mortgage, whether for a new home purchase or a refinance, should engage actively with their lender. An informed approach allows borrowers to gain clarity on their loan, ensuring they understand the financial implications. Asking detailed questions empowers borrowers to make decisions that align with their financial goals and navigate the mortgage process with greater assurance.

Questions About Loan Products and Terms

Inquire about current interest rates, as they directly impact monthly payments and total loan cost. Ask if the rate is fixed (constant for loan life) or adjustable (rate changes after initial period). Understand how rates are locked, including the duration of the rate lock period, to prevent unexpected changes before closing. Rate lock periods typically range from 30 to 90 days.

Ask about different loan types and their requirements. Conventional loans often require 3-5% down, with 20% or more avoiding private mortgage insurance. FHA loans are government-insured, allowing lower down payments (around 3.5%) and are accessible for those with less-than-perfect credit. VA loans, guaranteed by the U.S. Department of Veterans Affairs, are for eligible service members, veterans, and spouses, often requiring no down payment or private mortgage insurance. USDA loans support rural development for low- and moderate-income borrowers in eligible areas, often with no down payment.

The loan term influences monthly payments and total interest. Borrowers commonly choose between 15-year and 30-year terms. A 15-year mortgage has higher monthly payments but less total interest and faster homeownership. A 30-year mortgage offers lower monthly payments and more flexibility, but accrues more interest.

Mortgage points are fees paid to the lender. Discount points (typically 1% of loan) lower the interest rate, while origination points cover loan processing. Ask how these points affect overall cost and if discount points are advantageous. Also, inquire about prepayment penalties, fees charged for early loan payoff. Though less common, some loans may include these.

Questions About Mortgage Costs and Fees

Closing costs are expenses paid at the real estate transaction’s conclusion. These include appraisal fees (property value assessment) and title insurance fees (protecting against title defects). Other common costs are escrow fees, attorney fees, and recording fees. Request a detailed breakdown of all estimated closing costs to understand the total financial outlay.

Origination fees are lender charges for creating and processing the loan, including administrative, processing, and underwriting fees. These differ from discount points, though both are initial costs. Ask for a clear explanation of each fee and its purpose.

An escrow account manages property expenses like taxes and homeowners insurance premiums. The lender collects a portion of these costs with each monthly mortgage payment to ensure timely payment. Ask how the escrow payment is calculated and if an escrow account is mandatory for your loan.

Private Mortgage Insurance (PMI) is typically required for conventional loans with less than 20% down payment. It protects the lender if the borrower defaults. Inquire about PMI cost, which varies by loan-to-value ratio and credit score. Ask about conditions for removal; PMI can often be canceled once equity reaches 20% of the original appraised value or purchase price.

Lender credits cover some closing costs in exchange for a slightly higher interest rate. This reduces upfront expenses but increases total interest paid over the loan’s life. Assess if accepting lender credits is beneficial, weighing immediate savings against long-term cost. Prepaids are expenses paid at closing for a future period, like property taxes and homeowners insurance premiums to seed the escrow account. Understand these upfront costs for budgeting.

Questions About the Application and Approval Process

Ask for a comprehensive list of required application documents. This typically includes recent pay stubs, W-2 forms, federal tax returns (last two years), and bank statements to verify assets. Providing these promptly and correctly helps expedite the process.

A pre-approval letter assesses creditworthiness and indicates potential loan amount. Inquire about steps to obtain pre-approval, required financial information, and its validity (typically 60-90 days). This letter is beneficial when making property offers, demonstrating serious intent and financial capability.

Underwriting involves the lender verifying all application financial information. Ask about the typical underwriting timeline (a few days to several weeks) and what might cause delays or additional documentation requests. Understanding this stage helps manage loan approval timeline expectations.

Ask how the lender will provide loan status updates, who your primary contact will be, and update frequency. This ensures smooth information flow and allows quick issue resolution. Inquire about the estimated time from full application submission to final closing.

Ask about the minimum credit score for specific loan products. Inquire how past credit issues (late payments, collections) might impact eligibility or loan terms. Lenders assess debt-to-income (DTI) ratio, comparing monthly debt payments to gross monthly income. Ask how the lender calculates DTI and their maximum DTI limits (commonly 43-50% depending on loan type and lender).

Questions About Lender Services and Post-Closing

Ask if the originating lender will service the loan or sell it. If sold, payments go to a different entity, potentially changing contact or payment methods. Understand this possibility to prepare for any loan management transition.

Inquire how to contact the lender or loan servicer for post-closing assistance. Ask about online portals for payments, statements, or documents. Knowing payment options like automatic deductions or online bill pay ensures convenience and timely payments.

Ask the lender about their policies and services for future refinancing needs. Some lenders offer streamlined processes or special programs for existing customers, beneficial if interest rates drop or circumstances change. Understanding these options helps long-term financial planning.

Some lenders offer resources or guidance for mortgage management, especially for first-time homebuyers. This may include financial counseling, homeownership education, or support for financial challenges. Inquiring about such services provides additional value and ongoing assistance.