14 questions to ask a mortgage lender
Quick insights
- Ask a mortgage lender which loan type and term fit your credit profile, income stability, down payment and homeownership plans.
- A complete understanding of your mortgage requires reviewing the interest rate, estimated monthly mortgage payment, lender fees, closing costs and total cash to close before committing.
- Clarifying what could affect your final approval can help prevent last-minute surprises. This typically includes home appraisal results, employment verification, debt-to-income ratio and eligibility for down payment assistance.
Buying a house raises many questions. Does it fit your needs? Is it in a neighborhood you love? Can you afford it? Will it pass inspection?
While you decide if a house can become your home, your lender can answer technical questions about financing. Here are 14 questions to ask a mortgage lender when buying a home.
What type of mortgage do you recommend?
Your mortgage lender should evaluate your overall financial profile, including credit score, income stability, assets, debt-to-income ratio, savings, down payment and liabilities, before recommending any type of loan product. Common options include:
- Conventional loans: Conventional loans can be ideal for borrowers with strong credit and stable income. If you put down 20%, private mortgage insurance (PMI) is not required.
- FHA loans: FHA loans generally help buyers with lower credit scores or smaller savings, such as first-time homebuyers. FHA loans typically require mortgage insurance premiums (MIP).
- VA loans: VA loans are available to eligible servicemembers, veterans and surviving spouses. No down payment or private mortgage insurance is required; however, borrowers may have to pay the VA funding fee, a one-time upfront cost.
- Fixed-rate mortgages: With fixed-rate mortgages, your interest rate stays the same for the life of the loan (commonly 15-year and 30-year mortgages).
- Adjustable-rate mortgages (ARMs): With an adjustable-rate mortgage, the interest rate is fixed for an initial period and then adjusts periodically (such as a 5/1 ARM).
In this discussion, your lender should explain why one loan type may fit your situation better than another. This includes how the mortgage terms compare and affect your budget.
What is the interest rate?
Your lender can explain what interest rate you’ll pay on your loan. They’ll also explain how your financial status and credit score affect that rate.
The interest rate impacts how much house you can afford. A higher interest rate means a higher monthly payment. Understanding how your rate affects your mortgage payments will help you calculate how much home you can afford.
How much down payment is needed?
Some lenders prefer a down payment of 20% of the total purchase price, but you may be eligible to go as low as 3%. However, down payment requirements may vary depending on the type of loan and your credit history. The more money you put down, the lower your loan amount. That converts to less interest you pay over the life of your loan.
Do I qualify for any down payment assistance?
You or the home you’re buying may qualify for a local, state or national homebuying assistance program. Such programs may be able to help with all or part of your down payment. Your lender can help you find appropriate programs based on your situation and goals.
How much is the monthly mortgage payment?
Ask your lender to break down mortgage payments, so you can understand what you need to budget every month. Your mortgage payments are determined by the loan amount, term, interest rate and more. The monthly amount always includes the principal on the loan plus interest. Property taxes and homeowner’s insurance may also be included and paid into an escrow account.
Are mortgage points available?
Buying mortgage points, sometimes called discount points, is a way to buy down your interest rate. Paying points lowers your interest rate and reduces your monthly mortgage payment. Buying points with your lender can help you increase your down payment or put more toward repairs on the house after closing day.
Do you offer a mortgage rate lock?
A written lock-in agreement guarantees the rate on your mortgage for a period of time, generally 30 to 90 days. Taking this step protects you from rising interest rates while you’re waiting to close on the home. Rates could also drop, so locking in a rate is up to you.
Speak to your lender about any costs for locking in your rate or extending the duration of a rate lock. This can help in case closing takes longer than expected or if you can relock if rates go down.
What are the closing costs?
Closing costs are the final fees you’ll pay before the mortgage can be finalized. Appraisal, origination or processing fees, title insurance and the lender’s attorney fees are commonly included.
It’s important to know the fees associated with closing ahead of time, so you aren’t caught off guard. After you apply, your lender will provide you with a Loan Estimate listing the costs. In some cases, a seller may be willing to pay a portion of your closing costs during negotiations.
What do I need to bring to closing?
Your lender will let you know everything you need to bring to closing, such as a photo ID and proof of homeowner’s insurance. A cashier’s check or proof of wire transfer for the down payment and closing costs may also be needed.
Do I need specific homeowner’s insurance?
Lenders require proof that a home is, or will be, adequately insured. Homeowner’s insurance covers damage or loss of your home and personal possessions from things like fire, storms, theft and vandalism. General liability coverage also protects you in case someone is injured while on your property.
Homeowner’s insurance may not cover flood damage unless you request it. If your home lies in a flood plain or may suffer damage from heavy rains, flash flooding or mudflows, you may also be required to have separate flood insuranceOpens overlay.
Speak to your lender about the coverage you’ll need, when you’ll need it and how to prove you have it.
What are the property taxes?
Property or real estate taxes are one of the costs of owning a home. Your local government sets the tax rate, which covers municipal (or county) services that benefit the community. Property taxes can vary greatly. Ask your real estate agent or lender how much your property taxes will be.
Do I need an escrow account for taxes and insurance?
You may need to set up an escrow account with your lender in order to spread these payments out. You’ll pay a portion of the taxes and insurance with each mortgage payment. That money is held in an escrow account until the taxes and insurance bills are due, then paid from your escrow account, so you don’t have to come up with the full amount at once. Ask your lender if you have the option to pay these bills on your own or if your loan requires that it be escrowed through the lender.
Can I make additional payments?
If you’re planning to make additional payments toward your mortgage in future, ask your lender if there are any fees or prepayment penalties. Your lender can discuss these in detail.
What additional fees do I need to be aware of?
Ask your lender to explain these and any other costs and whether they apply to your home loan. Some fees are optional, and others may be negotiable. For example, you may be asked to pay for a property survey, a title search or recording the deed at your county recorder’s office. Some lenders charge an origination fee to process your loan.
Rely on your team of mortgage professionals
These homebuying professionals include your real estate agent, mortgage lender, home inspector, appraiser and others. Each of them tends to help with different parts of your homebuying journey. Together, they help you find and buy your new home.
Your real estate agent
This professional will probably be with you every step of the way, from seeing the first house all the way to closing. Choose a real estate agent with a good reputation; bonus points if you like them personally. You’ll spend a lot of time together throughout the homebuying process.
What to expect from your real estate agent:
- They’ll help you clarify what you want and need in a home. Then they’ll show you homes that meet those needs.
- They know about the schools, nearby grocery stores and neighborhood parks. They can also offer insights into a neighborhood’s family-friendliness, general safety, ease of commuting and other important considerations.
- They can help you understand why homes are priced a certain way. They’ll also help you prepare an offer that has the best chance of being accepted.
Your mortgage lender
A mortgage lender will review your full financial picture (including your income, credit history, assets, DTI ratio and down payment). This review helps determine which mortgage options may fit your unique needs. Once you select a loan program, the lender can guide you through mortgage preapproval.
From budgeting and applying to underwriting and closing day, your lender is a key contact throughout the process. If you’re still deciding where to apply, learn how to find a mortgage lender. This way, you can compare different options and choose one that aligns with your goals.
Your home inspector
The home inspector will do a thorough inspection of your potential new home. Their job is to ensure the home is structurally sound and provide you with a list of any minor or major repairs.
An appraiser
While you don’t select the appraiser, they are an important part of the homebuying process. This expert looks at the home’s size and condition, then compares it to similar homes in the neighborhood that have recently sold. They’ll come up with an estimated value for the home you’re planning to buy.
Other members of your homebuying team
- A loan processor verifies the information on your loan application.
- An underwriter reviews your credit and finances to decide if your loan application can be approved by the lender.
- You may want a real estate lawyer to review your purchase agreement and represent you at closing.
- A tax advisor can help you understand the potential tax benefits of owning a home.
Ask your lender about anything you don’t understand
It’s important to ask questions throughout the homebuying process. After all, a home is a big purchase.
Knowing what questions to ask will help you navigate the homebuying journey with more confidence. You can also read through mortgage FAQs or our mortgage dictionary to help you prepare.
