The home buying process can be lengthy and at times confusing, and you’ll likely be spending a lot of time working closely with your mortgage broker. Because buying a home is one of the most significant financial decisions you’ll ever make, it’s important to make sure that you are informed every step of the way. Here are five questions that your mortgage broker wants you to ask.
Which Type of Loan Should I Get?
Hopefully you’ve spent a little bit of time researching the different types of home loans that are available, but until you know exactly what you qualify for, it’s hard to comparison shop. Your broker will evaluate things like your credit score, buying history, and the region in which you’re interested in purchasing to determine which loans products you’re eligible for.
How Do You Handle Rate Locks?
Rate locks can be a bit of a gamble, and some brokers prefer to play the odds. In some cases, you may ask the broker to lock a certain rate at a certain date, and they may tell you that the rate is locked. Some brokers may secretly delay locking the rate in hopes that rates will drop before your closing date.
If the rates take a dip, the broker can then lock the lower rate. However, if the rates rise, the broker may tell you that something was wrong with the paperwork and that it’s impossible to close your loan before the rate lock expires.
Talk to your broker about how they handle rate locks, and make sure you get a loan commitment letter from the lender to ensure that there are no unwelcome surprises down the road.
What Fees Do I Have to Pay?
The homebuying process comes with numerous hidden fees that go beyond the down payment and closing costs. For example, depending on your credit score and the current interest rates, you may have to pay one-time fees called “points” at closing. For every point you pay, your lender will decrease your interest rate by one percent. This lowers your monthly payment and can significantly reduce what you’ll pay over the life of the loan. Ask your broker if you will be required to pay any additional fees at closing.
Do I Have to Pay for Mortgage Insurance?
Generally speaking, if you are putting a down payment of less than 20 percent, you will be required to pay for mortgage insurance until your loan-to-value ratio falls below 80 percent. Mortgage insurance premiums can be rather expensive; in some places, they may cost up to $100 a month for every $100,000 borrowed. However, not all mortgages require mortgage insurance. For example, USDA and VA loans are two loans that do not require a down payment and do not require that you pay for mortgage insurance. Ask your broker whether you should expect to pay this additional cost.
What Should I Avoid Before Closing?
You’ve found your perfect home, your offer has been accepted, and your loan has been approved; nothing can cause the purchase to fall through, right? Not so fast. Any changes to your spending habits, your credit-to-debt ratio, or your employment could delay closing or even derail it entirely. Talk to your broker about how you can ensure that you are able to close on your home on time.
Throughout your home-buying process, your mortgage broker is one of your best allies. By keeping them in the loop on every decision you make and asking the right questions, you can ensure that the process goes as smoothly as possible.