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Questions Borrowers Should Ask Mortgage Lenders

Questions Borrowers Should Ask Mortgage Lenders

    We recommend that you contact at least four lenders when you shop for your mortgage.  Creating competition for your mortgage business will allow you to obtain the best terms for your loan which can save you thousands of dollars at closing and over the life of your loan.  Knowing the questions you should ask mortgage lenders is an important part of the lender selection process.  You want to gather the right information so that you can accurately and effectively compare proposals.  Below, we review the questions to ask so that you can make the most informed decision when you select a mortgage lender.  

    Below we provide a series of mortgage lender questions and answers to guide your discussions.  We advise borrowers to ask these questions as part of the lender evaluation and selection process.  Lenders who are willing to engage with you to answer these questions are more likely to possess deeper mortgage expertise and offer you a higher level of customer service.  Lenders who are unwilling to address these questions or who do not provide compelling answers are probably less experienced and less likely to provide a positive mortgage experience for borrowers.

    In short, an experienced and qualified lender welcomes questions from potential borrowers whereas a less qualified lender may react less positively so the questions function as an informative test. Understanding the questions you should ask mortgage lenders makes the selection process more productive and enables you to find the mortgage that is right for you.

  • Will You Fund My Loan?
  • This question allows you to determine if you are working with a mortgage broker or a direct funding lender.  If the answer is yes, you are working with a direct lender . If the answer is no, you are working with a mortgage broker. There are positives and negatives to each type of lender and it is important to understand from the start what type of lender you are speaking with.  Direct lenders may offer better mortgage terms because they are funding your loan directly but mortgage brokers offer borrower the benefit of shopping a network of lenders and they may have a wider range of loan programs to offer.  We recommend that borrowers contact at least one mortgage broker and one direct lender when you shop for a mortgage.

  • Will My Loan Be Sold After Closing?
  • If the lender intends to sell your mortgage after closing, then potentially you may have to make your payment to, and deal with, another party going forward.  While this does not change the terms of your mortgage it can cause complexity in the future. This should not be the deciding factor when you select a lender but it is something to consider.  It is important to highlight that even if a lender sells your loan, they may still service it, which means you continuing making your payments to that lender.  Some borrowers may prefer that their mortgage is not sold or serviced by a different company so this is a helpful question to ask.

  • Can I Lock My Mortgage Rate?
  • You need to make sure that you can lock your mortgage rate at any time during the process. Locking your loan protects you against an increase in interest rate and fees over the course of the mortgage process.   You should also ask lenders if it costs extra money to lock your mortgage rate.  Some times lenders charge extra fees or a higher mortgage rate when you lock your loan and borrowers should try to avoid these additional costs.

  • Will You Provide a Loan Estimate and Lender Fees Worksheet?
  • When you contact lenders, it is also important that you request you request a Loan Estimate and Lender Fees Worksheet. These documents outline the key terms of the lender's proposal including mortgage rate and closing costs.  Use the information from these documents to compare proposals, negotiate better terms and save money on your mortgage. Please note that some lenders may request that you to submit a loan application to receive an Loan Estimate and Lender Fees Worksheet.  Lenders, however, cannot charge you to submit a loan application or to provide these documents.  Plus, most lenders will provide a Loan Estimate and Lender Fees Worksheet even if you do not submit a loan application.

  • Will You Pre-Approve Me?
  • Getting pre-approved for your mortgage provide greater certainty that your loan will close, enables you to identify and resolve issues before you apply for the loan and potentially accelerates the mortgage process.  Getting pre-approved also makes you more attractive to property sellers.  Plus, it is free and there is no obligation for borrowers.  You want to make sure that you select a lender who is willing to pre-approve you for your mortgage.

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  • Do You Have Experience with the Loan Program I Want?
  • There are many different types of mortgage programs for different borrowers and property types.  Each program has unique eligibility guidelines and qualification requirements so you want to make sure that your lender has experience with program you want.  For example, there multiple no or low down payment programs that may require slightly different applicant information.  Or the qualification requirements for a mortgage on an investment property are different than the requirements for a loan on an owner occupied property.  Working with a lender who possesses expertise with a specific loan program can make the mortgage process go much smoother.

    You should also confirm that the lender offers the mortgage program you need as many lenders offer a limited selection of programs. For example, if you need a larger mortgage, make sure the lender offers jumbo loans. You do not want to waste your time selecting a lender that does not offer the loan program you want.

  • Ask for Client Referenes
  • We recommend that you request multiple client references when you contact lenders.  A lender's response to this question will tell you a lot.  If a lender is willing to provide references they are more likely to provide a higher lever of customer service.  If the lender is unwilling to provide client references it suggests that the they are either inexperienced or do not have many satisfied clients.  You can learn from a lender's client references, even if you only contact one or two references.

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  • What Lender Fees to You Charge Upfront to Process My Mortgage?
  • It is important to understand the upfront fees a lender charges to process your loan.  These fees are typically required by the lender before you know if your mortgage has been approved and are usually non-refundable. Remember to compare multiple proposals to make sure you find the lender offering the lowest combination of mortgage rate and closing costs.  Determining the upfront lender costs is an important part of the lender selection process.

  • Will You Receive a Lender Paid Rebate After Closing?
  • This question only applies to mortgage brokers.  If the answer is yes, then you know how the mortgage broker is being compensated.  Mortgage brokers are usually paid by the funding, or wholesale, lender and not directly by the borrower.  Knowing this information may allow you to negotiate better loan terms, including a lower mortgage rate.  The mortgage broker may be willing to take a lower lender paid rebate to offer you improved mortgage terms.

  • What Are Your Mortgage Qualification Requirements?
  • Applicants must meet a lender's mortgage qualification requirements to qualify for the loan so it is very important that you understand these requirements before you select your lender.  Qualification requirements usually focus on your credit score, debt-to-income ratio, loan-to-value (LTV) ratio, down payment and employment history.  Make sure that you meet the borrower's qualification requirements in advance of applying for the mortgage so that you have no negative surprises.

    In addition to understanding the qualification requirements, make sure you understand the personal and financial documents the lender requires to submit your loan application.  You want to make sure you have your paperwork in order and can provide the documents necessary to process your mortgage.

  • Are You Willing to Compete for My Mortgage Business?
  • If a lender is willing to compete for your mortgage business then they may be more open to negotiating key loan terms and offer you a better proposal. If a lender is unwilling to compete for your business then they have either offered you their best and final terms or do not want your business.  For example, if a lender refuses to provide a mortgage quote or proposal, we recommend that you contact a different lender.

    Shopping lenders and creating competition for your mortgage business enables you to find the best loan terms. Contact multiple lenders in the table below to shop for your mortgage. Comparing loan proposals enables you to find the mortgage and lender that are right for you.

  • Rate Details*
    Loan Program:  
    Monthly Payment:  
    APR:  
    Rate:  
    Points  More Info:
    Points: Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
     
    Total Lender Fees:  
    Loan type:  
    Property Value:  
    Loan to Value:  
    Credit Rating:  
    Date Submitted:  
    Monthly Housing Payments
    P & I More Info
    Principal & Interest: A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the reduction of the principal balance.
    Mortgage Insurance More Info
    Mortgage Insurance: The monthly cost for a policy that protects the lender in case you’re unable to repay the full amount of the loan. It is typically required for loans that have a loan-to-value ratio between 80% to 100%.
    (Estimated)
    Property Tax More Info
    Property Tax: (Also called "Real Estate Tax.") Property taxes are government assessments on real estate property. With mortgage financing, the local, county or state tax assessment on real estate property is considered part of the monthly housing obligation and typically collected and set aside by the lender ...
    (Estimated)
    Homeowner Insurance More Info
    Homeowner Insurance: or also commonly called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.lender ...
    (Estimated)
    Homeowner Association Fee More Info
    Homeowner Association fee: (HOA) fees are funds that are collected from homeowners in a condominium complex to obtain the income needed to pay (typically) for master insurance, exterior and interior (as appropriate) maintenance, landscaping, water, sewer, and garbage costs.
    (If Any)
    Total Monthly Housing Payments
    Lender Fees
    Points More Info
    Points Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
    Origination Fee More Info
    Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
    Credit Report Fee More Info
    Credit Report Fee: Fee charged to obtain an applicant’s credit history prepared by one or all of the three major credit bureaus. Used by lender to determine the borrower’s creditworthiness.
    Tax Service Fee More Info
    Tax Service Fee: A fee charged by the lender to cover the cost of retaining a tax service agency. These agencies monitor the property tax payments on the property and report the results to the lender.
    Processing Fee More Info
    Processing Fee: A processing fee is a charge by the lender for clerical items associated with the loan. Examples of processing include loan set up, organization of loan conditions for underwriting, and preparing required disclosures for the borrower.
    Underwriting Fee More Info
    Underwriting Fee: A fee charged by the lender to verify information on the loan application, authenticate the property’s value, and perform a risk analysis on the overall loan package.
    Wire Transfer Fee More Info
    Wire Transfer Fee: In most cases lenders wire funds to escrow companies to fund a loan. Commercial banks that perform this function will charge the lender so the fee is generally passed on to the borrower.
    (If Any)
    FHA Upfront Premium More Info
    FHA Upfront Premium: A fee paid in cash at the close of escrow or more commonly it is financed into the loan. These premiums are pooled together by the FHA and are used to insure the risk of borrower default on FHA loans. FHA upfront premiums are prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the FHA upfront premium paid at loan inception.
    (If any)
    VA funding Fee (If any)
    Flood Fee
    Other Fees More Info

    Other fees could be either additional Administrative Fees that a lender charges or it could be a Flat Fee to cover all lender charges such as: (Origination Fees, Points, Underwriting and Processing Fees, Credit Reports and Tax Service Fees)

    The flat fee does not include prepaid items and third party costs such as appraisal fees, recording fees, prepaid interest, property & transfer taxes, homeowners insurance, borrower’s attorney’s fees, private mortgage insurance premiums (if applicable), survey costs, title insurance and related services.

    Total Lender Fees
    *Actual rates and other information may vary. Sponsored results shown only include participating lenders. The information you enter on this page will only be shared with lenders you choose to contact, either by calling the phone number or requesting a quote.
    Current Mortgage Rates as of December 11, 2018
    • Lender
    • APR
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    • Fees
    • Contact
    Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click here for more information on rates and product details.
  • Watch our Mortgage Lender Options video tutorial.

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  • Sources

    Lender Questions: https://www.consumerfinance.gov/owning-a-home/explore/contact-multiple-lenders/

About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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