23 Important Questions You Need to Ask Your Loan Officer
Photo Copyright : Deyan Georgiev / 123rf.com
Being in charge of moving a family (even a family of one) can make you feel like a big-top ringleader. The spotlight is all on you. There are innumerable balls in the air. And at any moment, you’re sure you’ll slip off that wobbly tightrope you’ve been walking and pray that there’s a net to catch you. Surely, people don’t do this for fun, do they?
Circus performers may look like they’re taking their lives in their hands every day. But the best performers are well trained, well choreographed, and prepared for any contingency. That’s exactly the way you should go into your home purchase, too.
Don’t walk out into the center ring unprepared. When it comes to securing your home loan, that means understanding your finances and knowing what questions to ask. From the right type of loan for you to unanticipated fees, years of your life depend on the answers you get. Here are 23 important questions you need to ask your mortgage loan officer.
How much can I borrow for a home?
There are a number of factors that help you determine how much home you can afford. In addition to your income and budget, your loan officer will take into account your income-to-debt ratio. As a rule of thumb, no more than 36% of your pre-tax income should go to paying debt. So, if you have large student loans or car loans, that will affect your capacity to borrow for a home.
What is the difference between pre-qualification and pre-approval?
They may seem similar at first glance, but don’t fall for the sleight of hand. Pre-qualification and pre-approval do two significantly different things. To a seller, a lender’s pre-approval means more than a pre-qualification letter. If a seller knows your financing is secure, your offer is taken more seriously.
What types of home loans do you offer?
Not all lenders are created equal. There are conventional loans, government-insured loans, interest-only loans, home equity lines, and loans with rates that are fixed or adjustable. If you know what type of loan you want, or if your assistance program requires a certain type of loan, make sure it’s compatible with what your lender offers. If not, keeping shopping until you find the right lender.
How much down payment is required?
You’ve scrimped and you’ve saved. And you have a sizable nest egg for your home down payment. Then your agent explained what closing costs are. Now you’re not sure you can cover it. Well, the good news is that different types of home loans require different amounts of payment down.
Does the property or I qualify for down payment assistance?
Depending on the type of loan you want, your income, and your credit score, you may qualify for savings on your down payment and closing costs. There are more than 2,400 homeownership programs available across the country. Find out what special low down payment programs and accompanying down payment assistance programs your lender offers.
What is the interest rate and annual percentage rate on that loan?
Does the mortgage rate quoted include the interest rate and/or the APR? An interest rate may seem like a low number, but it could double the cost of your home over time. The APR accounts for your interest plus fees and other loan-related charges. That means you can use it as an apples-to-apples comparison among lenders.
What are the discount points and origination fees?
Origination fees are your tickets into the mortgage arena. Discount points equal a deduction in the amount of interest you pay on your loan. They’re also tax deductible. If discount points are available and you can afford them in conjunction with your down payment, it could equal big savings over time. Ask your lender how many points are included in the quoted interest rate and what the benefits might be to buying more or fewer points.