Questions to Ask Your Mortgage Loan Officer Before Getting a Home Loan

Getting a mortgage to purchase a home is one of the biggest financial decisions you’ll make in your life, That’s why it’s crucial to find the right mortgage lender and loan program for your needs I’ve put together this guide to help you ask the right questions when interviewing mortgage loan officers Asking these key questions upfront will help ensure you find the best loan with the lowest rates and fees,

What Will My Fees and Payments Be?

One of the most important things to understand is how much your total monthly payments will be and what fees you’ll have to pay throughout the loan process Here are some specific questions to ask

• What is the interest rate you can offer me on this loan program? The rate will significantly impact your total monthly payments.

• What will my total monthly mortgage payment cover? This includes principal, interest, taxes, insurance and any HOA fees. Make sure you understand all the components.

• What is the origination fee or charge to obtain this mortgage? Many lenders charge 1-2% of the loan amount as an origination fee.

• What other closing costs and fees will I have to pay? Title insurance, appraisal fees and other closing costs can add up. Ask for an estimate.

• Do you charge any prepayment penalties if I pay off my mortgage early? Some loans have penalties if you refinance or sell within the first few years.

Getting estimates on all these fees upfront ensures there won’t be any surprises at closing. Ask the loan officer to provide a Loan Estimate document that breaks down all these costs.

Which Types of Mortgage Terms Do You Offer?

Mortgages come in different term lengths, typically 15 or 30 years. The longer the term, the lower the monthly payment but the more interest you pay over the life of the loan. Consider asking:

• Do you offer both 15 and 30-year fixed rate mortgage options? I’d like to compare payments.

• What term lengths for adjustable rate mortgages do you provide? ARMs may come in 3, 5, 7 or 10 year terms.

• Do you offer any specialty mortgages like a physician loan? These can come with benefits like lower rates or payments.

• How much lower would my payments be with a longer 40 or 50 year term? Provides perspective.

Discuss your budget and financial goals to see if a shorter or longer term makes sense for your situation. A loan officer can run the numbers at different terms.

What Credit Qualifications Do You Require?

Lenders have varying credit score requirements and standards when reviewing your credit report. Asking these questions will help you determine if you may qualify:

• What minimum credit score do you require for each loan program you offer? Scores usually need to be 620-700 for conventional loans.

• How much attention do you pay to my credit history length, mix of credit types and payment history? These all influence approval.

• Do you require a down payment for borrowers who have excellent credit but little credit history? First time home buyers often face this.

• What credit report do you use when evaluating my application? Make sure they check all 3 major reports from Experian, Equifax and TransUnion.

If your credit is borderline, a loan officer can provide tips to improve your changes of approval, like paying down balances or disputing errors.

Do You Offer Mortgage Points?

Mortgage points, also called discount points, allow you to pay more upfront to lower your interest rate and monthly payments. Ask:

• What is your current pricing for mortgage points? Usually 1 point costs 1% of the loan amount.

• How much would 1 point lower my rate on this loan program? The reduction varies based on economic factors.

• Is there a limit to how many points I can purchase to get the lowest rate possible? Many lenders cap this at 2-3 points.

• Do I get a refund of a portion of points if I pay off my loan within a few years? Some lenders provide a partial refund.

Crunch the numbers to see if paying points upfront saves enough on monthly payments to be worthwhile. Break even can take 3-5 years.

Do I Need an Escrow Account?

Lenders require escrow accounts to pay your property taxes and insurance automatically. But you may be able to avoid it if you meet certain criteria:

• What are your policies on escrow accounts? Do I have to have one? Lenders prefer escrows but some waive this requirement.

• What criteria do I need to meet to qualify for waiving the escrow requirement? Minimum credit score and down payment % often apply.

• How do I request an escrow waiver and what is the process? Get details in writing.

• What happens if I fail to pay insurance/taxes on my own without an escrow account? You default, face penalties and could have policy cancelled.

Escrow accounts ensure your payments are made on time, but waiving one gives you control. Weigh the pros and cons.

What Is the Interest Rate and APR?

Focus on both the nominal interest rate and Annual Percentage Rate (APR) when comparing loan offers:

• What specific interest rate are you able to offer on this loan program today? Rates change daily.

• What is the APR on this loan, given my specific situation? The APR factors in points and fees.

• How often have your rates changed in the past 3 months? Ask for historical perspective.

• Do you expect rates to increase or decrease in the next 30 days? See if they’ll forecast short term moves.

If the APR is much higher than the nominal rate, you may be paying high points or fees. Keep shopping around for the best deal.

Do You Offer a Mortgage Rate Lock?

Rate locks hold your interest rate for 30-90 days while your loan is processed:

• Do you offer free rate locks? How long do they last? Many lenders include a lock period.

• What if my rate lock expires and rates have increased? You may lose your rate.

• Can I pay for an extended rate lock if my purchase takes longer? Extensions usually cost 0.25-0.5%.

• Are there any conditions under which my rate could still change even during a lock? Read the fine print.

Avoid surprises by fully understanding the lock terms. Ask for the policy in writing from the lender.

Bottom Line

Finding the right mortgage requires asking the loan officer these key questions upfront. Comparing interest rates, fees, terms and qualifications across multiple lenders is the best way to ensure you find the most affordable financing option. If one lender isn’t able to offer you the rates and fees you need to afford the monthly payment, keep shopping around. Be sure to get any promises or estimates in writing before committing to work with a specific mortgage lender.