Questions to ask mortgage lenders
Quick insights
- A mortgage lender can help you with the homebuying process, depending on your goals.
- Some questions are useful to ask lenders before you choose one, but your questions can differ depending on your priorities.
- Your conversations with an advisor can go a long way in helping you decide on a lender to finance your mortgage.
If you started to navigate real estate and mortgages, you might know that a mortgage lender is a crucial part of the process. The number of possibilities might seem daunting at first. There are ways you can sort through the sea of information and find a lender that helps turn your homeownership dreams into reality.
What does a mortgage lender do?
A mortgage lender is a company that directly provides a borrower with a loan for a home purchase or refinance.ec-refinance-hl000061 Lenders tend to be banks and financial institutions but are sometimes confused with mortgage brokers, which are companies that connect borrowers and lenders. Brokers and lenders are similar in that they often employ home lending advisors who can assist with the financial side of the homebuying process.
Important considerations when choosing a mortgage lender
Choosing a mortgage lender will be a significant decision, so it’s important to have a clear sense of your priorities before you start your search. Maybe you need a certain monthly payment or want a personalized experience. A lender could provide you with the right blend of the financial and personal sides of homebuying.
What to look for in a mortgage lender
Things can seem very complex for first-time homebuyers, but a mortgage lender may help you navigate the process. When you have a grasp on your financial situation and goals, schedule meetings or phone calls with potential lenders.
When speaking with lenders, pay attention to the responsiveness, communication style and willingness to address your concerns. Buying a home is a financial decision, but the experience is personal. You can be the judge of who you’re comfortable working with.
Questions to ask a mortgage lender
Here are some examples of what you might ask a home lending advisor, especially toward the beginning of your homebuying process.
What should I expect as a first-time homebuyer?
This question can give the lender an opportunity to explain how it does business and how it will serve you as a customer. Some lenders might offer a full sales pitch. Others might be more casual and direct. You could also hear something in between these extremes.
Here are some of the expectations a mortgage lender will usually set with you:
- Questions about your budget and goals
- An overview of the documents and personal information they’ll need at different stages of the process
- The mortgage options they offer, including loan terms and prevailing APRs
- Estimates that help you begin to understand the cost breakdown of a potential mortgage loan
Every company does business a bit differently. You might work with a single advisor almost the whole time, until you’re really close to settlement. Then, you might wrap things up with a loan officer at the lending company. Typically, your initial advisor will explain all this to you when you ask what to expect from working with the lender.
What credit bureau do mortgage lenders use?
You can ask your advisor this before you provide any personal information, as lenders often pull your credit report to evaluate a mortgage request. Lenders might review your credit report on file with any of the three major credit bureaus: Equifax®, Experian™ and TransUnion®. A lender could also use a tri-merge credit report, which summarizes your financial information from all three credit bureaus.
What credit score do mortgage lenders use?
Lenders could use a credit score from one of the two major credit scoring models, FICO® or VantageScore®. However, you should be aware that there are more credit scoring models than just these two. Also, credit score and credit history aren’t the only parts of your financial records a lender will review.
Which type of mortgage should I consider?
Lenders can get a detailed look at your finances when you begin the homebuying process. It’s worth sharing information about your budget early on in the process so that a home lending advisor can discuss mortgage options and which will meet your needs.
How much mortgage can I afford?
You could ask a mortgage lender to help answer this or use a mortgage calculatortools-and-calculator-hl000066 to help estimate your mortgage payments. A calculator typically asks for a home price, estimated down payment, your credit score and the property’s zip code. Besides the mortgage payment, a calculator can also estimate your loan principal and interest rate.
If you can, have your monthly budget handy when you use a mortgage calculator. The more accurate your inputs, the more accurate the estimates will be. A mortgage affordability calculator was created to help you discover how much home you can afford.
What are the current interest rates?
You can find current mortgage rates by location on our website. Rates are determined by several factors, including a home’s location, market activity and economic conditions. Rates might change every day, so you may want to ask your lender this question often.
You can continue discussing interest rates and your mortgage options throughout your home search, until it’s finally time to draw up the paperwork.
What homebuying fees will I need to pay?
Certain closing costs when buying a home may be unavoidable. You can ask about the specific fees a lender will charge if you’re considering the company. An advisor should be able to provide a detailed overview, even if certain figures are estimated until later in the purchase process. Even then, the cost breakdown should not differ greatly from the estimates.
How you can manage your mortgage after buying a home
A mortgage can be daunting when you’re not used to having one. Building confidence that you can manage your mortgage may require you to refer to your budget regularly and stick to it as your home search progresses. This way, life after you leave the closing table doesn’t bring financial surprises.
Use a mortgage calculator ahead of time
A mortgage calculator can provide helpful estimates before you even begin working with a mortgage lender. There are many options online that can help calculate a mortgage within your budget, including mortgage calculator. As you begin to better understand your homebuying estimates and get closer to settlement on your home, your monthly mortgage payment will become clearer.
Try to decide how you will pay
Automatic payments can take the stress out of remembering to pay your mortgage on time each month. If you can afford to make additional payments to your loan principal, you may build equity in your home faster. Last, but not least, mortgage assistance options may be available when you need them.
In summary
Working with a mortgage lender can be equal parts financial and personal. To help you choose a lender, start by confirming your budget and listing your goals. Your real estate agent can begin to help you shop for a home in your budget, but the lender is there to help you finalize the loan.
The mortgage rates and terms a lender can offer are important, as is its level of customer service and expertise. As you begin to speak with advisors at different mortgage companies, it's important to find one that can clearly answer your questions and make the homebuying process easier for you.
