Buying a house would require you to transact with a lot of different people—from the home seller to your mortgage lender. To protect your interests and get a good deal for your new home, you need to ask a lot of questions. Go beyond the usual research to know about the state of the house you’re moving in, the value of the property, the location, etc.
You also need to know how much exactly you’re going to pay for the mortgage, the requirements of your mortgage firm, the risks associated with the loan, and other financial matters. Purchasing a property is a huge financial commitment, after all. So before you sign the home loan agreement, here are the questions you should ask your mortgage lender.
What are the loan types you offer, and what is best for me?
Lending institutions don’t offer a one-size-fits-all type of loan. They have several options that differ in value, terms, period, and interest rates. The key is to find a loan program that suits your financial capabilities and preferences.
For example, if you’re on a tight budget, a loan option with no down payment, a low monthly fee, and longer terms might be the best choice. Talk to your potential lender about your financial concerns and ask them what type of loan they can suggest.
How much is the required down payment?
Lenders would ask their borrowers for a down payment before they release the loan amount. Typically, the down payment is 20% of the entire value of the loan. But some lenders are flexible and may only ask for as low as 3%.
But keep in mind that reducing the down payment will change the loan-to-value ratio. Hence, if the lenders allow you to pay less than the standard 20%, your loan period can increase, or you have to pay for mortgage insurance or other costs.
What is the interest rate?
When you obtain a mortgage loan, you’re paying the value of your property in arrears, the amount and time depending on your loan period. But the total expense will not only cover the principal value of the property. It will also include service fees and interest rates. Ask your lender about the interest rate, so you can get a better idea of how much you’re looking to pay monthly.
What are all the costs involved in the loan?
As mentioned, the loan will not only cover the principal amount of the property. It will also include the lender’s fee, interest rate, appraisals, credit reports, taxes, etc. That’s why it’s important to get a loan estimate. This is a detailed report of all the costs involved in the loan.
Lenders are required to provide you with a loan estimate, so don’t be afraid to ask for it. Study the values and crunch the numbers if you have to.
What are your application requirements?
Lenders don’t just give out loans to anyone. They abide by criteria in judging who gets approved and who doesn’t. So before getting too excited about obtaining your loan, find out if you’re qualified first.
Ask the lender what they would need from you. Generally, they would need documents that reflect your monthly income, bank accounts, tax payments, etc. Being ready with the necessary paperwork can expedite the process and prevent problems with your application.
You’re not limited to these questions. Don’t be afraid to ask your lender anything you’re not sure about. Obtaining a mortgage loan is not something that should be taken lightly. It’s a huge investment, so you have to be careful.