The Top 25 Questions to Ask a Lender

1. Are you a direct lender or a broker? It is good to know whether you are working with someone who will be able to underwrite the loan internally or whether he/she will send your loan package out to a different lender to do the underwriting. 2. What programs do you have to offer? Most lenders have conventional and government programs. However, if you need a niche program such as one for those with a recent bankruptcy, then you should know that every lender cannot help you. 3. Can you meet my closing deadline? If you are in contract to make a purchase, then you need to be sure that the lender can close your loan on time. You need to take some personal responsibility here as well. Collecting the documents for your lender quickly will help.

1. What are your fees? Some of the fees are lender generated. However, a good part of them are standard and customary third-party fees. 2. How much is the appraisal? This is also a third-party fee that your lender does not control but it is a good idea to know what to expect. 3. When will you send me a good faith estimate? It is required by law for your lender to send you a good faith estimate 24 hours after you apply and before you agree to move forward with the loan. This will enable you to see all of the fees associated with your loan. Keep in mind that changing your loan amount or even the type of loan program could mean a change in fees which would then have to be re-disclosed to you.

1. Is there a pre-payment penalty? Most loan programs do not have a pre-payment penalty. However, as you get into some of the subprime loans for bad credit, there are some lenders who attach a pre-payment penalty to their loans. These can also be bought down upfront prior to closing. 2. Is the mortgage program available at both a fixed and adjustable rate? If you do not plan to be in the home for more than just a few years, then ask about an adjustable rate option. This could help you to save money. 3. What are ALL of my mortgage program options? Although you may fit into a conventional loan, one of the other loan options may actually be better for you. Have the lender lay out all of the program options for which you may qualify. 4. If you live in a rural area, ask your lender to see whether the property address is USDA Eligible. USDA loans are a great option because they do not require a down payment and there is no PMI. Many people do not even realize that this is an option. 5. What are all of my down payment options? There are programs with various down payment requirements. VA and USDA have a zero down requirement and FHA with only a 3.5% down payment. Ask what options are available to you. Make sure your lender has access to these programs. 6. If you are putting less than 20% down, find out what programs can eliminate PMI. An example of a loan program with no PMI is a VA or USDA loan.

1. How long is your rate offer good for? What you are looking for here is to know when the rate expires. It could be a rate that is good for 30 days once it is locked in. 2. What will happen to my rate if the closing is delayed? There are times when your loan processing and underwriting are delayed. Your lender will then have to extend your rate. If rates have increased over the past few weeks, then it could cost money to extend your current rate to the new closing date. Your lender can absorb these costs even though they may ask you to possibly pay for a rate lock extension. 3. Can I buy the rate down? Many lenders offer the ability to buy the interest rate down. For example, for an extra half percent of the loan amount, they may be able to reduce the interest rate by .25%. This could make sense if you plan to stay in the home for a long time. The initial buy-down cost (half percent of the loan) would be surpassed by the total savings in interest with the lower rate. Your lender can do the math for you. 4. Will my down payment amount change the rate? The rate offered is sometimes partially tied to the down payment percentage. Ask whether your rate could be lowered if you put more money down. 5. Ask what else you can do to lower the rate. Your lender may offer various rate reduction options other than buying the rate down.

1. Ask about PMI if you are putting less than 20% down. Private mortgage insurance will add quite a bit to your monthly payment, and it really adds no value. Understand how much PMI will cost you each month. We mentioned above that you should also ask if there are mortgage programs that do not require PMI. 2. If I have PMI, how can I remove it from my payment eventually? Traditionally, you could apply to have the PMI removed from your mortgage once you have paid it down below 80% of the original purchase price. However, there may be other options and stipulations which will allow or prevent you from having PMI removed. You should fully understand this before moving ahead with your loan. 3. Ask if the loan is available in an interest-only payment option. Interest-only loans provide you with the flexibility of making only interest payments during times when cash flow is tight. Many lenders do not offer this option, but it is good to know this is available to you and what it would cost. 4. Do I have to escrow the property taxes and homeowners' insurance? There are some lenders that require taxes and insurance to be escrowed. In fact, some will have a small rate increase if you insist on making those payments outside of your monthly mortgage payment. This would mean you would essentially pre-pay 3 months of taxes at closing so they can keep it in an escrow account.

1. Do you offer bank statement loan programs? Many self-employed buyers show a very low net income on their tax returns after taking all the legitimate business deductions. The most common mortgage program for self-employed individuals now is the bank statement loan. If you are self-employed and your lender does not offer this program, then continue looking for another lender. 2. What is the minimum down payment required if I cannot document my income If you are self-employed and have good credit scores, you should be able to find a bank statement loan with as little as 10% down. Contact us through email or at 973-440-9255 if you need help finding a lender with this program.

1. What is the lowest credit score needed for loan approval? Some lenders have access to programs that will allow lower than what is usually permitted. An example is how some niche lenders offer FHA loans down to a 500-credit score with just 10% down. If you have bad credit, you should ask your lender about all of your options. 2. If I can improve my credit scores, can I get a better rate? Ask the lender how much your low credit scores are negatively impacting your rate and what would be your new rate if you are able to improve your scores. There are credit repair companies that can help to increase your score quickly. Meanwhile, read about how to improve your credit score yourself.