January 27, 2020
Investing in a home is a major milestone, and the bigger the milestone, the more complicated the process. That’s why you need a thorough list of questions to ask your mortgage broker before you agree to any loan.
Learn all your options
A quality broker will take the time to review all of your mortgage options, listing the benefits and drawbacks of each, according to NerdWallet writer Hal M. Bundrick, CFP. You shouldn’t feel pressured to accept a loan from a pushy broker. You’ll want a broker to explain how negative amortization loans, adjustable-rate loans, fixed-rate loans and interest-only loans compare, adds The Balance writer Elizabeth Weintraub.
Crunch the numbers
The right loan is one that fits your budget. You’ll want to know how much you need for the down payment, the interest rate and the Annual Percentage Rate. Although the “ideal” down payment is 20 percent, you have wriggle room, notes Bundrick.
“Qualified buyers can find mortgages with as little as 3 percent down, or even no down payment. Again, there are considerations for every down payment option. The best lenders will take the time to walk you through the choices,” according to Bundrick.
A mortgage loan can include unexpected fees. Weintraub recommends quizzing your broker about the cost of credit reports, appraisals, pest inspection reports, title fees and taxes, all of which will impact your bottom line.
“An estimate of these fees should be accurately included in a document called the Loan Estimate, which federal law requires that the broker give to you,” she notes. “You should ask for an estimate of these costs upfront, however, before you apply for the loan.”
You’ll also want to ask about how much you’ll have to pay in closing costs, adds Bundrick.
Monitor your credit checks
In order to get an accurate quote for your interest rate, your credit will need to be checked. If you’re talking with a broker who looks into several options, that translates into several credit checks. Ask your broker when each will look at your credit with a “hard credit check.” Bundrick recommends that if your credit will be subjected to multiple hard checks, to time them close together. By narrowing the window of checks to a “week or so” you’ll save your credit score some negative consequences.
Be bold with questions
The right broker will not shy away from your questions, and applying for a mortgage loan is not the time to be unclear about anything. In other words, ask questions about everything and anything you don’t understand, advises Weintraub.
Figure out the process
There’s nothing worse than watching your phone or computer for updates. Don’t waste time wondering — ask your broker how long the process takes and how and when you’ll be contacted, advises Bundrick. Having a clearer picture of the process, and its ups and downs, will help alleviate your stress.
By asking a lot of questions, you’ll be able to find the right broker and mortgage loan to help you achieve your home ownership goals. If you’re not sure that a broker is right for you, ask your current lending institution to see its options.