Information is power, and the more of if you have when you are applying for a mortgage, the better. With so many options out there, including the rise of digital mortgages, it is helpful to ask the right questions so that you are armed with the best information. Besides, once you are well-versed in-home buying, you can help your friends when it comes time for them to make the same leap. 

Whether you are a first-time homebuyer or it’s not your first rodeo, you will want to be sure and do your homework ahead of time. We are here to help and have tailored, relevant questions to ask when applying for a mortgage. 

Applying For A Mortgage Doesn’t Have To Be Overwhelming: Here Are 18 Questions To Ask A Mortgage Lender

Even though you are the one signing on the dotted line, buying a home is not a one-way street. There are multiple parties engaged in the process, each of which plays a different part. In addition to the main parties — the buyer and the seller — several other people are working behind the scenes to make it happen. 

These include the real estate salesperson, who can help you find the home of your dreams and who works on commission; the title insurer, who will ensure that there are no imperfections with the property title; an appraiser to assess the value of the property; an escrow firm that is a third party that stores documents and funds related to the transaction until it comes time to release them; mortgage lenders, including fintech firms and banks, that are licensed to issue a mortgage to borrowers; home inspectors make sure the home is up to snuff and identify any repairs that need to be made; credit reporting agency provides transparency into the creditworthiness of the borrower. 

Remember buying a home is one of life’s most significant milestones, and there are no dumb questions when it comes to your financial future. Let’s get to the mortgage-related questions to ask a mortgage broker. 

What kind of mortgage is the best option for me?

There is no one size fits all mortgage. So, when contemplating, “What questions should I ask my lender,” be sure and include one on the different types of mortgages to find the one that best fits your lifestyle. 

For instance, if you’ve already got shiny credit, a solid resume, and a predictable income, you might qualify for a conventional loan. If you are eyeing the pricey side of the neighborhood, a jumbo loan could be for you. If you are a first-time homebuyer, are in the early stages of growing your savings, and are working on improving your credit history, a government-issued mortgage might work. Now that you are settling down, a fixed-rate mortgage could fit the bill if you plan to plant roots. If you’re a risk-taker, you might want to ask your mortgage lender about an adjustable-rate mortgage or ARM. Other mortgage products include the 30-year of your parents’ generation, 15-year, VA if you’re in the military, and FHA, if you’re a first-time homebuyer. 

What is my interest rate?

The last thing you want to do is have sticker shock from your mortgage interest rate. Interest rate-related questions are good to ask your mortgage broker, whose job is to match you with a lender and find the best rate. This is also a question you can ask your mortgage lender about. Keep in mind that factors that will affect your rate could include your credit profile, home location, price and size of the mortgage, the amount you have earmarked for a down payment, length of the loan, whether it’s a fixed or ARM rate, and the type of loan.  

What documents are required for the mortgage process?

No matter what type of loan you pursue, you can’t escape the document gathering process, though the specific items you’ll need will vary. When you are thinking about questions to ask when applying for a mortgage, don’t leave out the document stage. Even if you have chosen a digital mortgage from a provider such as Ratecloud, you’ll still need to be prepared to submit several documents. These may include: 

  • Proof of income/pay stubs
  • Bank statements
  • Tax returns from the past two years  

How much will my fees and payments be?

You also don’t want to be caught like a deer in the headlights with fees and payments. These can sneak up on you, especially if you’re a first-time homebuyer. Providers such as Ratecloud use an automated process that slashes costs and enables them to pass along savings to homebuyers. Still, be sure and set aside some funds for expenses due before the closing date. Common fees include: 

  • Appraisal
  • Credit report
  • Application 

Fees are one of the questions to ask about when applying for a mortgage. 

What is the property appraisal process?

The property appraisal process is where you’ll make sure you’re not overpaying for your future home based on the fair value. There are different types of appraisals, all of which are completed by an outside party. An appraisal contingency, for instance, paves the way for you to abandon the deal if the appraisal does not measure up to the offer price. Other types of appraisals include: 

  • Hybrid appraisals that involve yet another third party to gather information 
  • Desktop appraisals, which rely on internet data rather than a third party to assess a home’s value. 
  • Drive-by appraisals, which involve exterior-only assessments and are mostly reserved for FHA and VA loans. 

What are your credit qualifications?

Credit certainly qualifies as part of mortgage loan questions. The stronger your credit profile, the better the interest rate you are likely to be eligible for with a mortgage, which will save you money during the course of the loan term. When you ask your mortgage lender about credit qualifications, you’ll likely find that the threshold to qualify for a mortgage will differ depending on the loan type and insurer. A good rule of thumb is to achieve a credit score of 760 or better for the best mortgage rate. 

What is the annual percentage rate?

Other mortgage-related questions should involve the annual percentage rate or APR. This is the rate of interest you will pay on an annualized basis. This number, expressed as a percentage, is the annual cost of your mortgage plus fees and charges. This is different from your loan interest rate and is something to ask about when applying for a mortgage.  

How much mortgage insurance will I have to pay?

When you are compiling your mortgage loan questions, you’ll want to be sure and include one on mortgage insurance. This is an additional product that offsets the risk of the loan for the lender and helps you to secure the funds you need for your new home. If you are doling out less than one-fifth of the price tag on the house, be prepared to pay mortgage insurance. 

The amount attached will depend on the type of mortgage you get. Mortgage insurance may be factored into your actual mortgage and become part of your monthly payments; you might pay it at the closing or some combination of both.

Will I be able to sign any paperwork digitally?

If you choose a digital mortgage, you will be able to save time. This is because you will be providing an e-signature on documents rather than having to sign your John Hancock on each one manually. 

When can I expect to receive a Loan Estimate (LE)?

When things start to get serious between you and the lender, that is when a loan estimate will come into play. You can expect to receive this document, which breaks down the loan components within three days of submitting your application to a lender. 

Do I have a Fixed-Rate or Adjustable-Rate Mortgage?

Among the questions to ask when applying for a mortgage is whether you’ve got a fixed-rate or adjustable-rate mortgage or ARM. This is especially true if you’re a first-time home buyer and might not be familiar with the difference. A fixed rate will remain constant throughout the mortgage term, while the rate on an ARM will fluctuate from time to time, depending on the economy. 

What form of communication will we use about my loan progress?

One of the questions to ask your lender involves the form of communication they prefer to use when updating you on your loan status. This way, you can gauge your expectations. A digital mortgage process by design will be faster than the experience with a traditional lender, so you can expect more frequent updates. 

How much house can I afford?

When it comes to how much house you can afford, the devil is in the details, as they say. This is an excellent question to ask your mortgage broker about. In turn, they will have questions for you, likely involving your debt-to-income ratio, which reflects your income and debts and lets them assess what price range you can afford and still pay for groceries, for example. 

What are discount points and origination fees?

Some parts of the mortgage process can be confusing, including discount fees and origination fees. Rather than racking your brain, these are perfect questions to ask when applying for a mortgage. Basically, discount points are fees you fork over to the lender at the time of the closing in exchange for a break on the mortgage interest rate. The origination fees, on the other hand, are designed to cover the loan processing costs. Origination fees vary based on the lender, so be sure and include this in your arsenal of questions to ask your mortgage broker. 

Is there a penalty for paying off my mortgage early?

If you can pay off your mortgage early, the last thing you want is to be penalized for it. Don’t forget to ask your mortgage broker or lender about any prepayment penalties that might be buried in the mortgage minutia. 

How much do I have to pay for my down payment?

When it comes to buying a house, the more money you can put down, the better. That is because the down payment will affect other factors such as the size of your mortgage, your monthly payments, and the type of mortgage you qualify for, among other factors. In addition, a higher down payment will result in a better loan to value ratio, which will help your cause with lenders and related fees. 

While you don’t want to cramp your lifestyle, you also want to create the most attractive mortgage conditions possible. While a 20% down payment would be ideal, this isn’t always possible, especially if you’re a first-time homebuyer. Your down payment could be as low as 3.5% or more along the average amount of 12% of the price tag on the home. The down payment issue is among the questions to ask a mortgage broker or lender. 

Can I Get a Loan Rate Lock?

Interest rates are a tricky beast, seemingly changing like the wind from when you start the application process to when you close. The sooner you can lock your rate in, the better. That’s why you’ll also want to ask your lender about getting a loan rate lock, which will ensure that the interest rate stays the same throughout the course of the home buying process if specific parameters are met. 

Learn more about Ratecloud’s Mortgage Options

When you start down the road of buying a home, you will be surrounded by professionals who are experts in the field. Capitalize on that and don’t hold back with questions to ask when applying for a mortgage. Doing so will give you confidence when the closing comes around that you have dotted all your i’s and crossed all your t’s. 

Ratecloud streamlines the process even further with its automated mortgage application process, saving you time and money along the way. With the one-two punch of all the right questions and Ratecloud’s automated offering, you will be well on your way to your new home. Get started right away on your digital mortgage application today.