Exploring your financing options is a painless task that could save you time and stress.  Being an educated buyer will ensure that you are well informed and making good decisions.

Use this checklist as a guide when speaking with your lender about getting a new home loan.

1.    What are the most popular types of mortgage you make?  Why?

This will give you insight as to what other buyers in similar situations have chosen.  There are countless options available and each buyer situation is unique so this will assist in getting you headed in the right direction.

2.    Which type of mortgage plan do you think would best suit us?

You don’t want a lender suggesting a loan type without knowing how your situation is unique. Maybe you are a student and need down payment assistance. Maybe you are here only temporarily on a job transfer.  You could be looking for a second home in preparation for retirement. Whatever the case may be, carefully selecting the correct mortgage type ensures the best outcome long term.

3.    Will I have to buy private mortgage insurance (PMI)?   If so, how much will it cost and how long is it required? 

Are you putting down less than 20%? Chances are you will need to take out private mortgage insurance (PMI).  The less a borrower puts down, the higher the risk to the lender. So, the lender wants insurance against a default.

4.    How long do funds need to be in my bank account before closing?

This is so important. Often times a borrower receives a down payment gift from a family member and the lender will often require the funds to be “seasoned” which means it needs to be documented that it has been deposited in a bank account.  Typical times are about 60-days but each lender is different.

5.    How long are the rates you have given me today good for?

Rates are down, then back up the next day.  Rates fluctuate several times daily.  It is important that you understand how long the rate is good for once you have been quoted.

6.    What “Rate Lock-in” options do I have?   Will I be able to obtain a lower rate if rates drop once I am ready for closing? 

This is a great question for those building a new home.  You want to be sure you don’t get anxious and lock-in too early.  If the home is not completed for whatever reason, your rate may not be guaranteed.  However, if interest rates are on an increasing trend, rate-protection ensures no last minute surprises.  Rate lock-ins typically allow one chance to float down if rates have dropped and is typically reviewed a week or so before closing.

7.    How long does the approval process take? Should I expect to have my information re-verified before closing? Be sure to know the difference between a pre-qualification and a pre-approval.  The pre-qualification is based on what you TELL the lender.  The pre-approval is based on what you PROVE to the lender with documentation like pay-stubs and bank statements.

The pre-qualification process usually takes just a few minutes.

The pre-approval process can take several days.

One common mistake often made is when buyers are so excited, just before closing they either buy a new car, new furniture or quit their job.  This can compromise your approval status. It is important that you know your information (including bank accounts, credit score and employment status) will be checked by the lender just a few days before closing.

8.    Is there anything I can do to better my financial situation before closing?

Maybe you can pay off a couple small bills.  Possibly work some overtime.  Your lender can offer some tips to maintain and/or improve your qualification status.

9.    Are there any penalties for paying off my loan early?

This is often called a “Pre-Payment Penalty”. Ask your lender what the rules are for payment.

10. Other than my down payment and homeowner’s insurance, what can I expect to pay at closing?  Can any of these be added to the mortgage? 

Be sure to consider these:  Home Owner Association (HOA) application fees, escrow accounts for taxes and insurance, rate buy-downs and even some small collection accounts the lender requires be paid off before closing.