10 Questions to Ask Your Mortgage Lender

Getting the answers you need to plan your future

By Broderick Perkins

 

 If you don’t ask questions, you won’t get answers. It’s especially important to ask lots of questions of your mortgage lender so you understand everything about financing one of your most valuable assets.

Here’s what you should ask your mortgage lender.

 

1. What types of mortgages do you offer?

You need to know the full range of loans available to find one that is best suited for your needs. Basically, there are fixed rate mortgages (FRMs), for which the interest rate remains fixed for the life of the loan, and adjustable rate mortgages (ARMs), for which the interest rate adjusts after an initial period — typically one to seven years. Each category has a host of variants. Some lenders offer a few types of loans while others offer many.

 

2. What mortgage is the best fit for me?

Your lender should easily be able to answer this question once you’ve completed an application and the lender takes stock of your employment, income, assets, credit, debt, expenses, down payment and other information about your finances.

 

3. What are the full costs of my mortgage?

Since Jan. 1, 2010, the answers can be found and discussed with your lender, line-by-line, on two documents.

Home loan originators must give you the mandated Good Faith Estimate (GFE) within three days of accepting your application. At closing, the lender must provide borrowers with the new Settlement Statement HUD-1, the final line-by-line list of mortgage and closing costs.

Along with the GFE, you’ll also receive the new “Shopping For Your Home Loan: HUD’s Settlement Cost Booklet” which helps explain the two documents.

Together, the new GFE and HUD-1 documents make it easier to determine if you are getting the loan at settlement that you were offered in the GFE.

The three-page GFE, provided by the mortgage broker or lender, shows the loan terms and the settlement charges you will pay if you go forward with a given mortgage. It explains which charges can change before settlement and which charges must remain the same. It also contains a shopping chart with worksheets to encourage you to shop around and compare several mortgage loans and the settlement costs of each.

The HUD-1 is a final list of all your charges and credits. In addition to the cost of the property, your down payment, the financed amount, your monthly payment, and loan terms, it includes your loan type, annual percentage rate (APR), points, commissions, yield spread premiums, originating fees and other loan costs as well as title and escrow fees, closing costs, tax and insurance payments, inspection fees, attorney fees, as well as information and costs related to rate locks and prepayment penalties -- the works.

 

4. When will I get the HUD-1?

You have the right under the Real Estate Settlement Procedures Act (RESPA) to inspect the HUD-1 Settlement Statement before settlement occurs and you should, at least a day before to go over all costs and ask the lender any related questions.

 

5. What documents must I provide?

To prove you can afford a mortgage loan, lenders will want to see proof of income and employment and assets along with statements of expenses and debts. You’ll also have to give the lender permission to pull your credit report and credit score. If you are self-employed or an investor, lenders may also want to see tax returns, IRS 1099 forms, profit and loss or income statements and other financial business records.

 

6. What are the qualifying guidelines for this loan?

The documents you supply will help you meet requirements related to income, employment, assets, liabilities and credit history. Down payment, income-to-debt ratio, even geographic location guidelines may vary.

 

7. Who will be the title and escrow agency or attorney?

A title search will be required to make sure the property is free and clear, but you shouldn't leave selection of the title company up to the lender. Shop around based on location and price. Check for referrals from people you trust. If you’ve used a title company before, using the same one again could save you some money. Do the same when selecting an escrow agency and attorney.

8. How long will it take to process my loan application?

The answer depends on how quickly you supply the required documents as well as on the lender's workload and demand for inspectors, appraisers and other professionals involved. Lenders will often say weeks, but it could take from a month to two. Get the best guess to determine when to lock in the mortgage rate.

 

9. What might delay approval of my loan?

• Being slow to deliver documents
• Failing to fully complete required documents
• Not being readily available to answer questions
• Failing to check your credit report

You should remain available to the lender during the loan application process. Between the time you submit your application and the time the loan is funded, you much notify the lender of any changes to your job, salary, debts, marital status or other conditions that could affect your application.

 

10. What are the chances that my loan would get sold?

At first your lender and loan servicer are usually the same. Federal law requires that at the closing table you receive and sign a document stating that your loan likely will be sold. Federal and state laws dictate that both the old and new servicing company notify you in writing of any changes so that you know who to pay in order to meet your responsibility as a mortgage holder.

 

Learn more at Realtor.com