Forget asking about interest rates. Below are the real questions home buyers should be asking their mortgage brokers and loan officers before even going all in with a loan application:
While years on the job isn’t always a defining factor for making a mortgage broker reputable, it’s definitely something to consider. There is little to zero training to become a loan officer. It can take years to really understand home loan programs, be able to perceive potential issues before they happen, and even longer to build relationships that are needed to overcome challenges, and close on time. Determination, and effort might be equally important. Before you even work with a mortgage broker, conduct research of your own and find out if they will be the right fit for you.
2. License numbers
License numbers can help check out the complaint history or disciplinary action against a mortgage company or individual loan officer. Remember, no matter how great anyone is, people may still complain. What’s more important is how those complaints were handled. Obtain license numbers to, once again, conduct your own research before you continue with a specific broker.
3. Closing costs
How much are the estimated closing costs? What are standard? What fees are specific to this company? What other third party costs and taxes may be involved? Ask for a Good Faith Estimate.
Ask for referrals to home inspectors, insurance agents, County Realtors, other sellers, title professionals, real estate attorneys, and appraisers. You don’t necessarily have to use them, but it’s often best to get referrals rather than play the phone book lottery. Deals will go smoother when your lender is working with third party professionals they already have relationships with.
5. What special programs do they have?
What special programs do they offer? Sometimes these are nothing more that a marketing ploy. Other times, they offer real value. Examples may include: programs for first time home buyers time, VA loans, discounts for specific careers like teaching or law enforcement, no closing costs, ARMs, stated income loans, and partnerships with housing assistance providers.
6. How long it will take to close?
How long will it take to close your loan and get the money after you make a formal application? Note that these can be different dates. Always allow extra time so you aren’t unexpectedly stuck between homes in a moving truck.
7. Other timelines
Other timelines matter too. Include loan processing, clearing conditions, appraisals, etc. It doesn’t matter if a lender can close in three days when local appraisers are backed up six weeks.
8. How different property types will affect the loan
If you buy a condo or duplex, instead of a single-family home, understand how it will affect interest rates, closing costs and the down payment.
9. How you will get loan updates?
How often will you get updates on the progress of your loan? How will they come? What about accessibility for questions?
10. Required credit scores and history
What credit scores are required? What other credit report factors may be an issue? For example; length of trade lines, high credit amounts, and old collections.
11. What verifications will be required?
How will previous employment, and rental or mortgage payments need to be verified? If you need cancelled checks to prove payments, and you can’t get any, you might not want apply there. Or if your previous employer is out of business, what happens then?
12. How could miscellaneous debt be a factor?
Will you have to pay off old collections and charge-offs? Will student loans, installment loans, and no payment credit lines be counted against your buying power even if you don’t actually have to make payments on them yet?
13. Payment shock
Sometimes simply moving up significantly in payments can be an issue. Maybe you just graduated and are becoming a highly paid doctor, or won the lottery and are buying a mansion, these will be factors.
14. DTI ratios
What are the debt-to-income ratio requirements? Do you fit? If not, what can you do about it?
15. How appraisal/inspection issues could affect the deal
Will properties in poor condition not be able to finance? What specific repair items will prevent a loan being made?
16. Total payments?
While a lender may not have control over all the related items, they can help you figure them out. For example; what will your taxes and insurance be on top of principal and interest payments? What about special insurances, or housing association dues?
17. What tradeoffs can land you a better deal?
San Diego mortgage professionals aren’t mind readers, and they often have far more options than they can lay out for everyone. So ask what features and terms are flexible? Can you get a lower payment by putting down more money at closing? Or can you bring less to closing if you take a higher interest rate?
18. Pre-payment penalties
Is there a penalty for paying off the loan early? How much will it be? What are the advantages of choosing a loan with a pre-payment penalty?
19. Advice for future mortgage planning
What tips can they offer for long term mortgage planning? How can you pay your loan sooner? What about obtaining lines of credit, or investment property loans?