Posted on December 5, 2011 Leave a Comment
When applying for a home loan, there are several things to consider and mortgage questions to ask when interviewing a loan officer in the mortgage industry. If the buyer will ask these 10 mortgage questions, there will be fewer surprises during the transaction process and a much better chance of a smooth close of escrow.
- What types of loan programs do you offer? Buyers are not eligible for all loan programs. There are first-time home buyer grants, FHA, VA loans, and Conventional Loans, all with adjustable, balloon or fixed rate mortgages. The buyer needs to be aware of their mortgage options.
- Which loan program do you think is best suited for us and why? The answer to this question will be based on the buyer’s circumstances. How long does the buyer plan to stay in the home? What are the buyer’s future employment goals, etc? The buyer needs to select a loan program that won’t create any immediate or future hardships.
- Are your fees negotiable? There are several fees associated with a mortgage, such as interest rate buy-downs, short and long term mortgage differentials, document preparation fees, loan origination fees and overall closing costs. Some mortgage companies will quote a lower interest rate, but then tack on additional costs to the buyer. This may be alright with the buyer if it keeps them in their financial comfort zone.
- Do I have to pay for PMI, what is the monthly cost, and how long do I have to pay for it? PMI stands for Private Mortgage Insurance. Buyers who put less than 20% down on a home more than likely will have to pay for PMI. This cost of insurance is added on to their monthly mortgage payment. Think of PMI as a “risk” fee charged by the lender. The less money a buyer puts down towards the purchase of a home, the higher risk the loan has to the lender. Once a buyer pays down the principal of the loan and has 20% equity in the home, they can ask the mortgage company to eliminate this monthly fee.
- Do you service the loan or sell the loan to another financial institution? This happens frequently in the financial industry. The only concern a buyer should have is when this happens, will it affect their mortgage in any way.
- Can I lock the interest rate you’re quoting and for how long? Most lenders will lock an interest rate for 30 days. If the buyer locks an interest rate for 60 or 90 days, there will be an additional fee to the buyer. The buyer needs reassurance that the lender can process the loan and
have all documents to the Title Company prior to the lock-in expiration period. The buyer needs to be careful when they are quoted an interest rate. A verbal quote is not legally enforceable, so be sure to ask for a Good Faith Estimate from the lender.
- How long will it take to approve my loan? Part of the answer will be based on the time it takes for the buyer to submit requested documentation to the lender. Be wary of the lender that provides an answer quickly, without researching and verifying the buyer’s financial situation first. If the buyer fulfills all requirements by the lender, the answer should be more than just a guess or estimate.
- How long before I can refinance the loan and is there a pre-payment penalty? We all encounter unforeseen circumstances at times. A job transfer, financial hardship or winning the lottery could be legitimate reasons for asking this question. Knowing ahead of time if there will be a penalty involved will better prepare the buyer.
- When do you send loan documents to the Title Company? This is an extremely important question. Over the years, many lenders sent documents to the Title Company on the day of closing. The Arizona Real Estate Purchase Agreement states that loan documents must be received 3 days prior to the close of escrow. However, it is extremely difficult to enforce this requirement. Once the Title Company receives the loan documents from the lender, the Title Company prepares the HUD statement. This document contains all the costs associated with the closing. They then schedule a time for the buyers and sellers to sign all the documents. Once completed, the Title Company then sends the complete package back to the lender for final approval before funding can occur. When loan documents are received by the Title Company on the day of closing, you can see why it would be impossible to close as per the terms of the purchase contract.
- Can I set up an account with the lender to pay property taxes and home owner’s insurance? Yes, generally an “impound account” is set up with the lender or servicer of the loan to pay your property taxes and insurance premiums. This obviously will increase the monthly payment to the lender, but will offer a great convenience to the buyer. Reducing stress is something most home owners come to appreciate.
Real Estate Homes, LLC and their Tucson and Phoenix real estate agents are serious about educating our clients. The home buying process should be a painless, stress-free and exciting adventure. Asking these questions when interviewing lenders will help start the buyer on the successful path towards the most important financial decision in their lives.