8 Questions to Ask Your Lender

It is your mortgage lender’s job to help you get a loan that is best for you. It can be intimidating and confusing treading new territory when buying a home. Familiarizing yourself with the terminology used in real estate and finding a lender who will walk you through the process makes all the difference in the world. Discussing the following questions with your lender will help you go forth with confidence so everybody can be on the same page and you can make the decision that’s best for you.

1. How long will I have to repay the loan (what is my loan term)?

The loan term is how long you will have to repay the loan. This will affect your monthly principal and interest payment, your interest rate, and how much interest you will pay over the life of the loan. In general, the longer your loan term, the more interest you will pay, and vice versa. Loans with shorter terms usually have lower interest costs but higher monthly payments than loans with longer terms.

2. What is the interest rate?

Be sure to ask your lender for a direct interest rate quote, as well as the corresponding annual percentage rate (APR) for the loan.

3. Is the interest rate fixed or adjustable?

Interest rates come in two basic types: fixed and adjustable. Your choice will affect whether your interest rate can change; the amount of monthly principal and interest payment and whether it can change; and how much interest you will pay over the life of the loan. With a fixed-rate loan, your interest rate and monthly principal and interest payment will stay the same, but your total monthly payment can still change. Adjustable-rate mortgages (ARMs) are often less predictable but may be cheaper in the short term. The interest rates can change based on the market so your payments can go up and down.

4. What type of loan am I getting?

Mortgage loans are categorized based on the size of the loan and whether they are part of a government program. This affects how much you will need for a down payment, the total cost of your loan (including interest and mortgage insurance), how much you can borrow, and the house price range you can consider. Each loan type is designed to fit different situations. These include conventional loans, FHA loans, and special program loans.

5. How much money do I need to put down for a down payment?

Generally, the larger the down payment you are able to make, the lower the interest rate you will receive and the more likely you are to be approved. If you cannot make a down payment of 20 percent, lenders usually will require you to purchase private mortgage insurance or obtain an FHA, VA, or USDA loan.

6. When can I lock in the interest rate?

Mortgage interest rates can change daily, sometimes hourly. If your interest rate is locked, your rate won’t change between when you get the rate lock and closing, as long as you close within the specified time frame and there are no changes to your application. Rate locks are typically available for 30, 45, or 60 days, and sometimes longer. If your rate is not locked, it can change at any time. Ask your lender when you can lock down a certain rate and for how long. Keep in mind lenders will usually offer lower interest rates for shorter-term locks and higher interest rates for longer-term.

7. What are the total estimated closing costs, all in all?

Closing costs include loan origination fees, appraisal fees, and attorney fees (if any), home inspection fees, and a slew of others. Your lender should provide you with a loan estimate form itemizing the approximate costs of your loan so you can budget accordingly.

8. When will the closing be?

There are a lot of factors that determine when your exact closing date will be. Many of these will be entirely out of your control. Ask your lender for an estimate of when you might expect to close. This way you’ll have a good idea of how much time you’re working with.