There are many reasons for needing to borrow money. For most people, a mortgage is the largest loan most people apply for. However, it can be very intimidating when shopping for a loan. It is important to get all the facts from the lender before making a decision. Here are some questions to ask a lender before signing the paperwork.
What do you offer?
Now, this may seem like an obvious question to ask. However, a lender may push a certain loan over another if you are unaware of the types of loans that they offer. There are the typical loans associated with mortgages that include fixed-rate loans, FHA loans, VA loans, adjustable-rate loans, USDA loans, and a jumbo loan. Make sure the lender takes the time to explain the differences between all of the loans. If the lender does not seem to have the time, this is not the lender for you.
Which loan is best?
After filling out the application and other necessary paperwork, the lender will be able to determine which loan will be the best option. However, depending on the situation, a traditional bank or lender may not have the best option. It may be necessary to seek out a hard money lender. Hard money lenders are usually private equity firms and maybe best the option when a property is going to be used as collateral.
What other costs are involved?
This is an important question. Many people forget about the closing costs which usually include lawyers’ fees, messenger fees, commission fees, and any other fees associated with buying your new home. Most of the time, closing costs are roughly 4 percent of the sale price, but each lender’s closing costs may be different. If you are unaware of the closing costs, this could be an expense that you were not prepared for. Also, closing costs are, at times, negotiable. The best way to compare costs is to ask lenders for good faith quotes. This will allow you to see the breakdown of all costs.
Down Payment help
If assistance will be needed to obtain the down payment, make sure to ask the lender if they participate in any of the down payment assistance programs. Not all lenders do. If the lender of your choice does not, it is time to find another lender. Homebuyers can save a lot of money by using the programs, and some buyers can save close to $20,000. It is worth taking a look at the programs. It may just require a little more leg work on your part.
How much time does the entire process take?
This is an important question to ask, especially if you are renting or leasing, and need to give notice. Depending on the loan, the entire process can take roughly two months. Also, if the house needs work to pass inspection, this needs to be added to the timeline.
To get the loan that is needed, make sure to go into the first meeting with your list of questions. The better prepared that you are, the better the answers will be. Do not be surprised if you do not end up with the first lender you talk to. Just like you, banks have different needs, and you may not be a good fit for each other. This is why it is important to ask your questions and listen to the answers. It is important to get a loan that meets your needs.