mortgage applicationUltimately, your dreams of owning a home start and end with your mortgage lender, because they have the power to give you or deny you the money needed to buy. Therefore, having clear communication with your lender throughout the home buying process should be one of your top priorities.

Aside from the basic questions such what is the principal loan amount and interest rate, many buyers often don’t understand what questions they should ask to ensure they have a clear understanding of their mortgage and the application process.

Here are 10 questions that home buyers usually forget to ask their lender.

1. What documents do I need for a loan? There is some paperwork you need to have on hand any time you meet with a mortgage representative, but upon your first meeting, you may be asked to prepare additional documents. This is a really simple question that you can’t afford to overlook.

2. What specialty/government loans do I qualify for? There are first time homeowner programs, VA loans, and more that every loan officer needs to check on for you. There may also be programs through your state or bank that can help you qualify for better loans or interest rates.

3. What are the lender fees? Sure, the lender gets paid through the interest on the loan. Many lenders, however, also have fees for their initial services. Calculate this out-of-pocket expense before you agree to any other terms.

4. What’s the minimum down payment to qualify for the loan? The standard amount for a down payment is 20% of the cost of the real estate. However, with some qualifications, lenders will approve as little as 3% down.

5. What are interest rates expected to do? Do the professionals expect mortgage rates to plummet right after you buy? If so, maybe now is not the time to apply for a loan. Or just get an ARM instead of a fixed-rate loan.

6. Is my rate locked in? On the other hand, if interest is expected to rise after you purchase your home, ensure that your rate is steady. Check to see if lock fees apply to your locked-in rate!

7. Does my approval have an expiration date? There could likely be a time limit on your loan approval, which would obviously light a fire under the home searching process.

8. Are there any prepayment penalties? Doesn’t the term prepayment penalty sound terrifying? That’s because it is! Prepayment penalties are a way for the lender to charge you for paying off your mortgage early. Luckily these are pretty much an outdated concept, so you shouldn’t have to worry about running into them. If you do, it’s probably best to walk away and find a different lender.

9. Is there a negative amortization option? You probably want the answer to this to be “no.” Negative amortization is a window of a payment plan to allow flexibility; you can pay the high or the low option on the bill. The trouble is, the money that doesn’t get paid when you opt for the lesser amount will gain additional interest, so you can end up paying way more than your original calculations. This option is more common in adjustable rate mortgages than fixed-rate loans. However, like with prepayment penalties, it’s probably just best to stay away this option altogether.

10. How long will the loan process take? You have 100 different balls in the air during a real estate transaction, so perhaps the most important thing you need to know is how long it will take to process the application. Lenders may answer as low as two weeks, but realistically it could take up to two months. Whatever the answer, check with your real estate agent that the loan officer’s timeline is sufficient.

If you’re in the Las Vegas area and would like to buy a home, contact my office at 702.331.8185.