Top 6 Questions You Should Never Forget to Ask a Mortgage Lender – Do You Know Them?
Thinking about buying a house in the Central Texas area? With a lengthy mortgage process, it’s easy to forget those important questions you wanted to ask your mortgage lender. KDH HomeFinder wanted to help facilitate the process for you and share some useful knowledge. Here are some important questions you should never forget to ask a mortgage lender:
1. What Type of Home Loans Does Your Company Offer?
Essentially, there is more than one type of mortgage loan a mortgage lender might offer. It is essential to find a lender who offers the right type of loan that you need. Keep in mind that not all vendors offer the same loan programs and may specialize in fewer or more loans than others. Here’s a full list of the 8 types of home mortgages:
CONVENTIONAL / FIXED RATE MORTGAGE
This is the most common mortgage type you’ll run into when shopping around for a new home. Conventional/Fixed rate loans are consistent and won’t ever change while you’re paying off your loan. They also come in terms of 5, 10, 15, 20, 30, and 40-years – but 15 to 30 years are the most common types of conventional/fixed loans.
INTEREST-ONLY MORTGAGE
Interest-Only Mortgages allow you to pay only the interest portion of your monthly payment for the first 5 or 10 years. This means you’re not required to pay the full payment on your mortgage like the conventional/fixed rate loan. The only downfall is that this type of loan usually takes an extra set of years to pay off, but it allows you to take a breather in case you find yourself in a tough financial spot.
ADJUSTABLE RATE MORTGAGE (ARM)
ARMs come in various forms. An Adjustable Rate Mortgage interest rate fluctuates throughout the loan’s lifetime. Rates on these loans tend to reflect changes in the economy and the cost of borrowing money.
Usually, the initial interest rate is fixed for a period of time. Once the fixed time period is over, the loan resets periodically – this can mean yearly or even monthly.
FHA LOANS
Federal Housing Administration loans are insured to prevent the possibility of not being able to repay the loan. FHA Loans also require smaller down payments. These loans are popular among borrowers who have low credit scores. This is because FHA loans allow people with low credit scores to be approved for small
down payment. Just remember that the lower your credit score, the higher the down payment you have to pay.
VA LOANS
VA loans make it easier for service members, veterans, and qualified spouses become homeowners. These loans are provided by private lenders, such as banks and mortgage companies. They also don’t require a minimum down payment and are guaranteed to these honorable servicemen.
COMBO / PIGGYBACK
Also known as Purchase Money Second Mortgages, Piggyback loans are used to avoid paying for private mortgage insurance (PMI). These types of loans are composed of two loans total – one for 80 percent of a home’s value, and the other to make up for the missing 20 percent down payment.
BALLOON
Balloon Mortgages allow borrowers to only pay the interest on a loan for a certain time period. Once the time period is over, borrowers pay off the total principal amount that is due. These mortgages are attractive to short-term borrowers because they tend to carry lower interest rates than loans with longer terms. Borrowers should always be aware of the refinancing risks and the possibility of the loan resetting at a higher interest rate.
JUMBO
Jumbo loans are meant for mortgages that are too big for the Federal Government to guarantee. For example, a $750,000 mortgage in Texas is sure to fall under a jumbo loan. These loans don’t guarantee the borrower a low interest rate like other mortgage plans do.
2. Which is the Best Loan For Me?
Buying a home is one of the most important decisions you’ll make during your lifetime. That’s why asking for the best loan is definitely one of the questions you should never forget to ask
3. What are the Closing Costs?
Always figure out all of the numbers in the fine print! The extra fees to pay lenders and third-parties usually run around 3 to 4 percent of a home’s sales price. Although some of the fees are negotiable, you should always get informed before the fees come can and haunt you in the end.
Different lenders have different closing costs. It’s okay to look around and later decide what vendor you’ll end up choosing.
4. How Much Time Does it Take to Complete a Mortgage?
If you’re new to the mortgage scene, don’t expect to have everything finalized in a week or two. On average, mortgages can take anywhere from 25 to 60 days to complete. So if you’re looking to buy a popular house, make sure you find a mortgage lender who can close a deal in less than a month.
The mortgage process depends on what type of loan you end up choosing and the condition of the home. For example, if the home is in need of any repairs before it can pass inspection, you won’t be able to close on the house until after the problem is fixed. Some loans, like the FHA Loan, also require a more thorough inspection, which can push back your mortgage closing date.
5. Can I Enter any Down Payment Assistance Programs?
Don’t worry if you need some help making a down payment. There are thousands of these programs across the country of Down Payment Assistance Programs that can end up saving you plenty of money in the long-run. It’s also a great way of securing that perfect home you had an eye on but weren’t sure if you had enough money to make a down payment for.
The State of Texas has different forms of down payment assistance programs. These programs also offer various perks including deferred payments and 0% interest rates. The only downfall is that unfortunately, not all lenders participate in these programs.
6. How Often Will We Be in Communication?
Before choosing a specific vendor, make sure you’re well-informed on how often they’ll stay in touch with you and how they do it. Every Mortgage Approval is a lengthy process and we don’t want you to feel neglected at any moment.
You’ll want your mortgage lender to stay by your side every step of the way and be available for any questions or concerns that may pop up. If you’re lucky, try finding a loan vendor that is willing to answer your calls on the weekends.
The best way to get a better answer to this question is by doing some research on what past clients have to say about a specific mortgage lender. You’re sure to find out likely they are to provide the customer satisfaction you deserve.
Let us know your thoughts and if there are any additional questions you should never forget to ask a mortgage lender.
This really answered my problem, thank you!