Financing & Insuring

5 Questions to Ask When You’re Choosing a Mortgage Lender

July 8, 2020

Before you’re handed the keys to your dream home, you’ll have to pick a mortgage lender to help with your homebuying journey. But how do you find the right one? Here are five key questions that can help you narrow down your lender options and choose the one that makes your homebuying process as smooth as possible.

What are my loan options?

A good mortgage lender won’t simply list off all the various types of loans, they’ll help you determine which loan works best for you personally. If a lender claims they have the right loan for you without asking about your financial situation, credit score and ideal down payment, keep looking: you want a lender that lists the pros and cons of options in relation to your specific needs.

Check out our free guide for more information on mortgages.

What is the interest rate and annual percentage rate?

Ask potential lenders for interest rate and annual percentage rate (APR) quotes. While your interest rate will be determined by a range of factors, including your credit score and the size of your potential down payment, the APR will give you some insight into the full cost of your loan. Because the APR includes both the interest rate and the fees a lender charges to originate the loan, this will give a number you can directly compare to competitor rates.

Can I lock my interest rate?

A rate lock is a guarantee from your lender that your mortgage interest rate will stay the same for a specific period of time, even if rates fluctuate throughout the industry. If you’re interested in locking your interest rate, ask potential lenders about this possibility up front. Also, ask if there is a fee for locking the rate, and if the lock protects all loan costs. Is there a “float-down” clause that will let you apply for a lower rate if rates fall during your lock period? Rate locks can be very helpful during the homebuying process, and it’s a good idea to get as much detail as possible on how a given lender handles them.

Can you give me an estimate of closing costs?

Ask prospective lenders about the average closing costs in your state, and which fees and inspections are legally required, which are optional, and which you can choose for yourself. Closing costs can include appraisal fees, origination fees, attorney fees, title insurance and more, and it’s good to have a handle on them before you embark on the homebuying process.

What is your closing timeline?

Make sure the lender’s timelines line up with your homebuying goals. You’ll have to include a closing date when you purchase your new home, so it’s good to know ahead of time how long a lender takes to process a loan. Also, find out about any potential obstacles—you can face extra costs and issues if your lender can’t complete your loan in time.

Are you currently looking for a lender? Be sure to check out our affiliate partner, HomeAmerican Mortgage.

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