Important Questions to Ask Your Mortgage Lender

Shopping for your new home should begin with shopping for your lender. This person is going to be integral in not just securing the financing for your new home, but also guiding you through the process to achieve the right financing and a timely closing.

While interviewing possible financing providers, here are some of the possible questions to ask your mortgage professional:

• How much experience do you have with financing a new construction home? The knowledge that comes with experience in specifically working on this type of financing can make the difference between closing on time and facing delays.
• Are you licensed by the state? Make sure your lender has the proper credentials to offer you a loan. The requirements vary by state, but a credible provider will be licensed as a mortgage lender, mortgage servicer, or mortgage broker.
• When I contact you, what’s the typical response time? Lenders are like real estate agents. They expect to be “on call”. A lender who doesn’t take your calls on weekends or evenings isn’t focused on customer service.
• What financial institutions do you represent? If you’re speaking with a representative of a bank or credit union, the answer is simple. But a mortgage broker will shop around to various financial institutions, and you should know who might be financing your new home.
• What types of loans do you have experience with? Depending on your situation, you might qualify for a conventional loan or a government-insured loan: FHA (Federal Housing Authority), VA (Veterans Affairs), or USDA (U.S. Department of Agriculture). A VA loan requires no down payment. Some loans require more documentation, and an experienced lender or broker is a smart choice to navigate the loan process, including understanding the loan qualifications.
• Can you guide me through making improvements to my credit, if necessary? Improving your credit score could qualify you for a higher mortgage or lower rate—or both. Ask the potential lender how they help people who might need to improve their credit.
• Are you aware of any special financing programs from the builder or state or local sources that I might be able to take advantage of? Look for a lender who is looking out for you—someone who is invested in finding you the best value and best fit for your needs.
• What happens if the interest rate goes up between the time I sign the purchase agreement and my home is finished? Interest rates fluctuate. Your lender should be aware of the movement that influences rates, and advise you when it’s time to lock in a rate—as well as whether there’s a cost to do so.
• Can you give me an estimate of how much cash I’ll need for the closing? What fees will I have to pay? Different lenders have different rates on their fees. Even a lender who offers you a tempting rate might not be the best choice if, ultimately, the fees are higher than another mortgage lender.
• If I’m putting less than 20 percent down, how much will mortgage insurance cost? Private mortgage insurance is often required when your down payment is less than 20 percent of the amount being borrowed, and it’s included in your monthly mortgage payment. Find out if your down payment and loan type will require a PMI and the estimate cost.
• How long will it take for the final loan approval once I’ve been pre-approved? For the type of loan you’re considering, get an estimate of the processing time to actually fund the loan. On average, it takes 30 to 45 days. What kind of issues can delay the closing from the financing standpoint?
• Does my loan have any pre-payment penalties? If loan pre-payment is even a possibility, you need to know up-front any costs to use that option.

Of course, this is not a complete list of all the questions to ask a potential lender, nor is it a definite list of all issues involved with choosing a lender or in financing your purchase. But we hope it gives you a great start.

Your home builder might have a preferred lender. This professional has the experience of not just handling the financing associated with new home construction, but is also familiar with the builder’s processes. Be sure to talk to the preferred lender, if one is available!