8 questions you should ask your lender!

It's a good time to be shopping for mortgage rates. 30-year interest rates have been below 4.25% for the last five months, and many lenders now quote rates in the 3s.

For buyers, the availability of low and no-down payment mortgages is making homeownership more accessible; and for refinancers, low interest rates have allowed the FHA Streamline Refinance and VA Streamline Refinance (IRRRL) programs, as well as the HARP program for underwater homeowners to come back into the picture.

Have you seen today's low rates?

Call me to get a rate quote today.

Will You Get The Lowest Available Rate?

Mortgage rates are at their lowest levels in more than a year, but not everyone will get access to today's lowest rates. How much you're borrowing, the value of your home, and your credit score all help determine your final rate quote from a bank.

Home buyers have three basic steps they can follow. First, get pre-approved. 

Getting pre-approved before beginning to buy a home will help you set your home purchase expectations. For example, you may believe that the most home you can afford is a 2-bedroom, 2-bathroom in a particular neighborhood, but it's the 3-bed/3-bath you really want.

During the pre-approval process, you may find that you're actually eligible to buy either. Pre-approvals help buyers to find their limits.

Next, consider a home's affordability. There is more to owning a home than just paying on the mortgage. Buyers should account for maintenance costs and should have access to an "emergency fund" of at least 3 months of living expenses. 

More reserves are better, but three should be a minimum.

Lastly, buyers should confirm their credit scores and check for errors or omission.

There are public-facing websites which can give you a free credit report, but your lender will often provide you with an official one during the pre-approval process. Be sure to ask for it.

With conventional loans, the higher your credit score, the better your rate will be. With FHA loans, VA loans, and USDA loans, credit scores are less important.

8 Questions You'll Want To Ask Your Lender

As part of the mortgage approval process, there are a series of questions you'll want to ask your lender. Some relate to your interest rate and closing costs; and, others relate to the process of getting approved.

The more you know, the smoother your approval can be.

There are many different types of fees associated with obtaining a mortgage. There are various services provided by the lender; and services provided by third parties in the transaction, which includes appraisers and title companies.

Ask your lender for an estimate of their closing costs and the closing costs of any outside party. Review each estimate carefully so you fully understand what each item means. When in doubt, ask for clarification.

This is an obvious, but important, question. Your mortgage interest rate is important because it's used to calculate your monthly payment, plus, it will determine how much interest you’ll pay to the bank over the life of the loan.

Note that the lowest rate isn't always the best rate. Some loans require mortgage insurance which can elevate your monthly costs; and, sometimes, a zero-closing-cost mortgage is your most suitable option. Zero closing cost loans often come with higher rates.

Mortgage lenders enforce different rate lock policies, so you'll want to get clarification. Lenders allow you to lock a mortgage rate for any where from 15 to 90 days.  Just remember that the longer your lock period, the higher your mortgage costs will be.

Discount points are an upfront loan cost which give borrowers access to lower mortgage rates. Origination points are loan fees paid to a lender. In both cases, one point is equal to one percent of the loan amount such that 1 discount point on a $200,000 loan would cost $2,000.

It's often optional for a borrower to pay discount points to get access to lower mortgage rates; or origination points to compensate the lender directly. Ask your lender what the impact to your bottom-line would be with, and without, points. This way, you can understand all of your options fully.

Some loans programs require just a small downpayment; the FHA loan, for example, required just 3.5% down at closing. However, except for the VA loan which never charges for mortgage insurance, loans with less than 20% down will require some form of mortgage insurance. This is true for conventional, FHA and USDA mortgages.

Another consideration with your downpayment is that larger downpayments can get buyers access to lower mortgage rates. Be sure to ask your lender whether a larger downpayment would make you eligible for lower mortgage rates.

There are tens of moving parts in a mortgage transaction, and many are co-dependent. If the lender's underwriters are backed up, for example, or if the appraisal process is requiring extra time, the overall approval process can slow to a crawl.

The amount of time is takes to process a loan application will vary between lenders. In today's market, some lenders are closing loans in as few as three weeks. Others are requiring 60 days or more. Make no assumptions about the time required to approve your loan. Ask your lender how long it will take.

With few exceptions, mortgage lenders require similar documentation in order to underwrite and approve a mortgage. Proof of income via federal tax returns; and proof of assets is required nearly 100% of the time. Then, based on the traits of your loan and credit profile, you will be asked to provide other, supporting documentation.

Your lender won't ask for paperwork unless it's needed to approve your loan. Gather everything that's requested.

Mortgage approvals are sometimes delayed. This can happen when information was not properly disclosed at the point of application; or when the buyer makes an inadvertent change to its credit profile. One way to cause a delay is to purchase a car or make a major credit purchase between application and your closing date. Another is to omit key details about your employment history.

Limit delays by providing your lender with complete and accurate information. Your lender can also provide you with a list of "Do's and Dont's" to help you avoid ruining your loan while its in-process.

Compare Today's Low Mortgage Rates

Today's mortgage rates are at their lowest levels in more than a year, which is helping to make homes more affordable nationwide. It's a terrific time to consider buying a home, or refinancing one. Mortgage rates may never be this low again.

Prepare yourself for your approval and ask good questions of your lender.

The information contained on Brenda's Mortgage News is for informational purposes only and is not an advertisement for products offered by Stearns Lending LLC. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Stearns Lending LLC, its officers, parent, or affiliates.