10 Questions You Must Ask Your Mortgage Broker or Lender
Mortgage brokers and their lending partners are an integral part of the home-buying process for many prospective homeowners. Mortgage brokers work as the intermediaries between you as the homebuyer and the lender offering various mortgage options. While you can get a mortgage on your own without the help of a broker, choosing to use one comes with a slew of benefits. Licensed mortgage brokers manage the application process from start to finish, and they help find the best-fit mortgage for your situation. However, not all brokers work in the same way nor do they get the same results for homebuyers. It is important to ask several questions of your mortgage broker and the lender before getting a mortgage pre-approval.
Experience and Licensing Questions
What’s Your Business Experience?
One of the first questions to ask a mortgage broker is their level of experience in the industry. While having a short time in the business does not necessarily equate to a bad outcome for a homebuyer, having several years and references from other satisfied customers is a good sign. Having ample experience also means a broker is more likely to have worked with a homebuyer with a similar financial situation or unique mortgage need.
Are You Licensed?
Mortgage brokers must be licensed in order to operate in the state where they work with customers. Homebuyers should ask for licensing details or research a broker online before deciding to work with the individual or the business. The mortgage broker license process includes passing an exam and fulfilling education requirements, holding a mortgage broker bond, and completing an application. Having a license does not mean a broker will be the best fit for every homebuyer, but it does mean they have taken certain steps to ensure they are complying with state regulations.
Do You Have a Surety Bond?
Many mortgage brokers have surety bonds in place that are meant to protect customers from bad business practices. Ask your potential broker if they have a bond in place, and if they can provide proof it is in good standing. A bond differs from insurance, so be sure to specify the information you want to see when speaking with a mortgage broker.
Do You Have Any References from Past Clients?
Testimonials from satisfied customers can be helpful in determining a mortgage broker’s track record. Most brokers work with homebuyers from many different economic backgrounds with varied home buying wants and needs. Ask your potential broker if they have any references or reviews from past clients or REALTORS® that they can share with you.
Understanding Your Loan Options
What Loan Programs Do You Offer?
One of the advantages of working with a mortgage broker is that he or she has access to several different lenders. With a single application and single point of contact, homebuyers can get mortgage options from several different mortgage companies, banks, or credit unions. However, make sure that they’re reviewing all of your options to ensure they’re finding the best fit for you. FHA, Conventional, VA (for Veterans) and USDA (for rural areas) are common options that should be explored.
What is the Best Mortgage Option for Me?
Not every home buyer has the same financial means or credit score, so the mortgage options available vary significantly. Some home loans have extra fees, such as private mortgage insurance or a higher interest rate, based on the amount of down payment you can provide. Ask your mortgage broker what they think may make the most financial sense for you with your financial details in mind.
What is the Interest Rate and APR?
A home loan is a big financial commitment, no matter if it is your first home or your fifth. One of the most substantial components of the mortgage is the mortgage interest rate. Ask your broker what interest rates are available, including whether those offered are fixed or variable. It is also important to ask about the Mortgage APR, which is the total of fees and the interest rate together. Your broker should be able to provide this information in a clear way.
Do You Offer Rate Locks?
Interest rates are always on the move, and mortgage rate locks allow home buyers to lock in a specific rate for a set period of time. Typically, rate locks are available for 30, 45, 60, or 90 days, but there may be a fee charged for opting into a rate lock. There may also be lock extension fees if a rate lock is changed during the set timeframe. Be sure to ask your mortgage broker if rate locks are offered, how they work, and any fees that may be associated with putting one in place.
Is there a Loan Estimate?
Your mortgage loan estimate is a detailed document that spells out fees and expenses you pay to get into your home. When an application is submitted to your mortgage broker, you should have access to a loan estimate relatively quickly after the application is processed. Ask your broker if you can see the loan estimate before making a commitment to one mortgage or another. A broker may also direct you to the lender for the loan estimate, so clarify who is responsible for the document when possible.
Will My Loan Close On Time?
Getting a home loan can be an arduous process, and it is not until you reach the closing that the home is yours. Ask your mortgage broker if they foresee any reason they won’t be able to close on the loan before your closing date. A delayed closing can disrupt your financial situation as well as cause stress in coordinating the move.
Having a mortgage broker in your corner as a home buyer can be beneficial, but only when you ask the right questions up front. If you don’t get the answers you want or need early in the process, consider working with a different broker who provides you with clear, easy-to-understand information about your home loan options, costs, and closing.
About the Author:
Eric Weisbrot is the Chief Marketing Officer of JW Surety Bonds. With years of experience in the surety industry under several different roles within the company, he is also a contributing author to the surety bond blog.
Disclaimer: This article, 10 Questions You Must Ask Your Mortgage Broker or Lender was written by Eric Weisbrot in his personal capacity. The views and opinions expressed in this article are the author’s own and do not necessarily reflect the views of MLS Mortgage Group.