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6 Questions to Ask When Choosing Your Mortgage Lender

There are many players in the mortgage market, from banks to credit unions to finance companies. It can be confusing to navigate an array of financing options, and to know what to look for when choosing a mortgage lender when you’re ready to take that important step forward in purchasing a home.

When choosing a mortgage lender, it’s important to know what you should look for to get the transparent and seamless lending experience you deserve. After all, buying a home is likely the largest financial decision you will ever make in your life, and you want to make sure you work with someone you trust and have no doubts in their ability to meet your needs.

Here are six questions to ask a mortgage lender before deciding to work with them:

What kind of mortgages do you offer? Not all mortgage lenders specialize or offer the same loan products. The types of loans available are FHA Loans, Conventional Loans, Jumbo Loans, VA Loans, and USDA loans and each may have specialty products available.  Additionally, some lenders may offer Down Payment Assistance Programs, which can assist you in qualifying for a loan. A lender should be able to describe the different types of loans and what they can offer you.

Do a little research ahead of time to get familiar with loan products, and have an idea of which loan product you might be interested in obtaining. Once you narrow down the type of loan you want, work with a lender that specializes in it to get the best experience.

Can you tell me about your company? With all of the checks and balances associated with lending and servicing a mortgage, it’s in your best interest to work with a company  you fully understand and trust. Mortgages can be offered by many kinds of institutions, all of which may give you a varying experience as a customer.

Ask the lender about their company history, including questions like: how long have you been in business? Do you have any affiliations? Do you have additional real estate expertise? Are you a direct lender? A direct mortgage lender is generally the party  that underwrites, approves the loan and can sometimes offer lower rates/costs and a quicker process than a mortgage broker. A mortgage broker is a middleman who works with different lenders, shops your loan and submits it  to the actual lender; having that middleman can sometimes result in delays and a higher cost for you. Asking these questions about the company  up front will avoid any surprises.

How long is the loan processing period? Once the offer on a home has been accepted and the terms of the purchase have been agreed upon, you’ll complete and submit your loan application to your lender.  During this time, you’ll work closely with your mortgage professional and receive guidance regarding inspections, appraisals, and other deadlines to ensure a smooth and timely closing.

The average loan processing period generally takes  between 21 to 45 days, depending on the type of loan. Be sure to ask your lender what the anticipated turnaround time for your loan type might be, and what obstacles might hold up closing. You’ll want to have an estimate ahead of time to know how long it might take you to get into your home. 

What are the rates and fees of a loan? A responsible lender will give you a rundown of the interest rate, terms and fees associated with a mortgage. When meeting with a mortgage professional, ask them questions about different rates available with different products and which products have the lowest fees;    their responses will demonstrate the level of their industry knowledge.  Ask questions on how much is needed for a down payment, have them explain private mortgage insurance, and ask if there are “pre-payment penalties” (penalties for paying off your loan early). 

A “Loan Estimate”  (LE)  lets you compare different lenders rates and terms and brings transparency to the home buying transaction, specifically showing you an estimate of your fees and  charges and identifying the loan terms  for your  loan. Each lender  is required to send you an LE within three business days  of receiving a completed loan application, and your lender should be available to help you understand this document to help you make an informed decision about your loan choice.

What is your customer service like? With direct mortgage lenders, you generally interact with the same people throughout the entire process from application to closing. This practice ensures you get the attention to detail that you deserve. Some lenders may pass you around from department to department and you may not receive  a single point of contact to reach out to if you have questions or need immediate assistance.

Ask to be shown the life cycle of the loan and if the loan will be  serviced at the institution or sold. The lender should be clear about who to contact if you have an issue  and point you to any educational resources available  to help you understand the mortgage process.

Are you fully licensed? You want to work with a lender that is committed to staying at the forefront of federal and state mandated changes that affect how lenders conduct business. Lenders should make their licensing information readily available so you can ensure they are 100% compliant with lending requirements.

Giving your business to a lender that is highly supportive of the government’s efforts to protect consumers and reduce fraud in the mortgage industry is one that will act as your partner and be on your side to give you the most transparent experience possible.

Once you have all the information, narrow down your list of lenders and ask even more focused questions about the type of loan you want to obtain. Drill down on the terms and make an informed decision to work with a lender you trust. 

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