Everything You Need to Know Before Talking With a Mortgage Lender for the First Time
One of the essential first steps to buying a home is speaking with a mortgage lender to see how much money you qualify for. Your initial discussion sets the tone for how much mortgage and what kinds of mortgage options are available.
Don’t Settle For The First Lender
Different lenders offer different mortgage options so having some background information about your ideal mortgage setup helps you vet lenders that can’t deliver. Being a smart mortgage shopper can help you avoid lenders who promise big programs with a lot of fine print.
Research the right lender to find an active loan officer with experience in the type of loan you are closing. You’ll have to leave the comfort of your computer and interview loan officers to learn who they are, how they operate, and what loan options are available. You can also read client testimonials, reviews, and ratings to ensure others were satisfied with the job.
What Should I Bring to My Meeting With a Lender?
When you meet with a lender or potential lender, you need to advocate for what you need. An accurate idea of your budget can help you get better loan conditions versus asking for the highest loan amount.
Be prepared for your lender meeting with financial information like pay stubs, bank account statements, W-2s, tax returns, current loans, and credit lines. Your lender will review this information and pre-approve you for a loan.
What Questions Should I Ask A Lender?
Here are a few questions to guide your conversation with your lender. These questions will give you and your lender a complete understanding of your needs, finances, and future.
“How much will this be per month?”
Always ask your lender how a total loan amount will look every month. You might be thrilled that you got approved for a $700,000 loan, but maybe the monthly payment is way too high for your budget. It’s better to ask now than be surprised later.
“What programs would you recommend that fit my needs?”
Do you need down payment assistance? Do you need creative financing techniques to afford a more expensive home than you should on paper? Mortgages are not one-size-fits-all. There are different lenders, interest rates, prepayment penalties, and amortization rates that affect the amount you qualify for and how you pay it back.
“What is the Interest Rate?”
Mortgage interest rates change daily based on economic fluctuations. A lender can quote you one day, and, depending on how long it takes you to enter the closing process, quote a different amount later.
If you have some flexibility in your timeline, you should ask your lender if mortgage rates are high or low. If your lender won’t tell you because they’re after a big profit, that’s a clear sign to find a new lender!
Often, you pay more money toward interest during the initial years than you do toward the principal amount of your home. That goes to show you how big of a role interest plays!
“What are the points?”
If the interest rate is too high, you can buy it down with points, or additional money upfront. One point is 1% of your mortgage amount. Using points can save you a ton of money in the long-term.
For example, let’s say you have a loan for $200,000. One point is $2,000. One point represents a 0.25% interest rate deduction. If you were paying 4.5% interest but you purchased a point, your rate would drop to 4.25%. This may not seem substantial upfront, but after you pay off your 30-year mortgage loan, you’ve saved $10,616.40 on interest payments.
“Do you offer rate locks?”
Rate locks mean that your interest rates won’t change between the offer and the closing as long as you close within a specified time frame. Your lender will help you determine if you need to opt for a rate lock now. Sometimes, you don’t. The information that they provide you will help you protect your future if the markets change in the future.
Find A Lender Who Caters To You
The right lender is approachable, reliable, and focused on you. The right lender cares most about getting you enough money and securing a payment plan that works for your budget. Customer service is essential, especially when dealing with a financial decision as big as getting a mortgage. Be prepared, go with your gut, and get the best loan!
If you need help calculating your ideal monthly payment, you can use my mortgage calculator.
