Buying a house is a significant milestone in anyone's life, and navigating the ​mortgage process can be daunting. From understanding interest rates to ​deciphering loan terms, there's much to consider. One crucial step in this ​journey is choosing the right mortgage lender. To ensure you're making an ​informed decision, asking the right questions is essential. In this blog post, ​we'll discuss the top four questions to ask your mortgage lender when ​preparing to buy a house.

But first, we have to answer the most important but least obvious question: How ​Should I Go About Finding a Mortgage Lender?

You can shop directly online, use the mortgage lender at your bank, ask for a ​referral from a friend who recently bought a home, or ask your realtor.

Who would know the best mortgage lenders in your market? Certainly, your ​friends, but those with more experience as to who is the best to get you to ​closing are your realtor and your settlement agent. Your realtor has reliable and ​accountable mortgage lenders so they can present reliable offers to listing ​agents. They know the best ones so they can feel more comfortable that the pre-​approval will lead to closing. They will only use mortgage lenders with whom they ​have extensive experience and who get the best feedback from their clients. ​After all, if a realtor sends their client to a mortgage lender and it does not work ​out, everyone looks and feels terrible. And that could be the last time that lender ​hears from your realtor.

On the other hand, realtors who have good relationships with mortgage lenders ​can prove to add exponential value to you. Now you have a team with a vested ​interest working behind the scenes making sure everything is taken care of for ​YOU as much as possible. And you are at the top: Realtors want to please you so ​you retain and refer them in the future; Lenders want to please realtors so they ​do the same. Let your experienced realtor recommend a local lender to you.

Now that you have your lender, what should you ask them, and what should you ​expect? Taking the second part first, be on the lookout for what they are asking ​you; the more they ask you, the more interested they are in getting the right fit. ​If your lender is not asking you questions about you and your move, you may ​want to consider another lender. Part of the information gathering comes when ​you apply. If your lender asks you to apply, rather than try to avoid it, be happy ​they are encouraging you. Only by reviewing a formal application can your lender ​come close to accurately predicting what position you are in to be approved and ​close on a home. If you want options and accuracy, embrace the online ​application as your key to putting all of the resources at your lenders disposal.

What to Ask Them?

1. Now that I have applied, what options look best for me?

You will want to mention any particular needs you have. Examples may be that ​you have little down payment funds or are in the process of changing jobs. You ​will be surprised at the solutions a good lender can offer. Ask your lender to ​explain the various types of mortgages they offer that fit your profile, what they ​recommend, and why. Most lenders offer fixed-rate mortgages, adjustable-rate ​mortgages (ARMs), FHA loans, VA loans, and USDA loans and possible bond ​loans (loans subsidized by local government agencies) By understanding your ​options, you can make an informed decision that aligns with your long-term ​financial goals.

2. What Is the Interest Rate, and How Is It Determined?

The interest rate on your mortgage will significantly impact your monthly ​payments and the overall cost of homeownership. Understanding how your lender ​determines the interest rate and whether it is fixed or adjustable is essential. ​Ask your lender for a detailed explanation of the current interest rates and any ​factors that may affect them, such as your credit score, down payment amount, ​and market conditions. Additionally, inquire about any potential discounts or ​incentives that may be available to you, such as special programs for first-time ​homebuyers or military members. By understanding the factors that influence ​your interest rate, you can better negotiate terms that work in your favor.

3. What Are the Closing Costs, and Are There Additional Fees?

Closing costs are the fees, taxes and expenses involved in buying a home and ​getting a mortgage. They come from/are assessed by the following: 1) lender ​costs; 2) settlement agent costs; 3) local and state taxes and recording fees; 4) ​HOA fees and expenses; 5) others could apply. Most mortgages are serviced ​using an escrow account to handle your tax and insurance payments. As a result, ​this account will be funded at closing to make sure the home is fully insured for ​the first year and there is enough money to pay the next property tax bill on your ​behalf. This category of expenses is often referred to as “Prepaids” or “Escrows”. ​Closing costs and Prepaids/Escrows are funds you will bring to closing in ​addition to your down payment. A good rule of thumb for estimating the total of ​the Closing Fees + Prepaids//escrows is 3% of the purchase price. In summary, ​when you buy a home, there are three components to your total cash to close: 1) ​Down Payment; 2) Closing Fees; 3) Prepaids/Escrows. Hopefully, once you are ​pre-approved, your lender will not only send you a sample estimate of this, but ​also reach out to you to set an appointment to review the initial estimate. It is ​essential for you to walk through this before making an offer so you fully ​understand. Understanding the total cost of obtaining a mortgage allows you to ​budget accordingly and avoid any financial strain.

4. In a competitive bid market, what strategies do you employ to help me get ​under contract? Most lenders send estimates and pre-approvals and wait for you ​to get under contract. Ask your lender what they can do to help in between/what ​they suggest you do to improve your position. Being available evenings and ​weekends, contacting the listing agent when you submit an offer, and ​encouraging you to become fully credit approved/underwritten are examples of ​qualities and suggestions you hope they offer without you having to ask.

Choosing the right mortgage lender is a critical step in the home buying process. ​By asking the right questions and understanding your options, you can secure a ​mortgage that meets your needs and sets you up for success as a homeowner. ​Remember to consider factors such as the reputation and reliability of the ​lending professional (you may need them in a pinch evenings/weekend), their ​relationship and ability to work with your realtor, and their responsiveness and ​accuracy. With the right information and guidance, you can confidently navigate ​the mortgage process and achieve your dream of homeownership.

Written by:

Justin Friedrichs

Arbor Home Loans

NMLS ID 1073887

(804) 339-7532

JFriedrichs@ArborHL.com

www.justinloans.com