10 Questions to Ask Before Choosing a Mortgage Lender
Purchasing a house is one of the largest decisions you'll ever make, and selecting the appropriate mortgage lender can be daunting. I've been there staring at stacks of paperwork, questioning whether I'm getting the best deal or if I'm setting myself up for stress down the road. After months of research and interviews with experts, I learned that asking the right questions up front can save you time, money, and headaches. Here is what you need to think about before writing.
1. What Types of Mortgages Do You Offer?
Mortgages are not equal. Lenders specialize. Some focus on fixed-rate loans, while others do adjustable-rate or government-backed mortgages. Ask to review their entire product offering. For example, if you're a first-time buyer, you might qualify for an FHA loan with a lower down payment. If you're self-employed, a portfolio loan might be a better fit. Understanding what they offer keeps you from settling for a one-size-fits-all option.
2. How Much Can I Borrow, and What is the Down Payment?
Your budget and savings will set your home-purchasing process. Lenders decide how much they'll loan you based on your income, debt, and credit score. Don't agree to the limit—they might pre-qualify you for more than you'll be able to pay back. And ask them about down payments. Some want 20%, but others will give you terms as low as 3% with private mortgage insurance (PMI). Describe how your down payment will affect your monthly payments and long-term costs.
3. What’s the Interest Rate and APR?
Interest rates determine how much you’ll pay over the life of the loan. But don’t stop there—ask for the annual percentage rate (APR), which includes fees and other costs. A low interest rate might look appealing, but a higher APR could mean hidden expenses. Compare both numbers across lenders to see who offers the best overall deal.
4. Are There Closing Costs, and Can You Waive Any Fees?
Closing costs typically range from 2% to 5% of your loan amount. These include appraisal fees, title insurance, and origination charges. Some lenders waive or reduce fees to attract borrowers. Ask upfront what’s negotiable. Even small savings here can add up to thousands of dollars.
5. Do You Charge Prepayment Penalties?
If you plan to pay off your mortgage early or make extra payments, check for prepayment penalties. These fees punish you for paying down your loan faster, which can limit your financial flexibility. Most lenders don’t include these anymore, but it’s worth confirming to avoid surprises.
6. How Long Does the Approval Process Take?
Time is critical in real estate. A delayed approval could cause you to lose your dream home to another buyer. Ask about their average processing time and what documents they need upfront. Some lenders offer expedited services for urgent cases.
7. What’s Your Reputation for Customer Service?
Your lender’s responsiveness can make or break your experience. Read online reviews or ask for referrals from friends. During your conversations, note how quickly they reply to emails or calls. If they’re slow now, they might be even slower after you’ve signed the contract.
8. Will You Lock My Rate, and For How Long?
Interest rates fluctuate daily. A rate lock guarantees your rate won’t increase while your loan is processed. Ask how long the lock lasts (usually 30-60 days) and if there’s a fee to extend it. If rates drop during this period, some lenders let you renegotiate—a valuable perk.
9. How Do You Handle Hard Credit Checks?
Applying for a mortgage triggers a hard credit inquiry, which can temporarily lower your credit score. Ask if the lender uses a “soft” check for pre-approval (which doesn’t affect your score) and how multiple applications within a short period might impact you.
10. Can You Explain the Worst-Case Scenario?
This might feel awkward, but it’s crucial. Ask how they’d handle late payments, job loss, or other financial hardships. Do they offer forbearance options? What happens if you default? A lender’s willingness to discuss these scenarios shows they prioritize transparency and long-term relationships over quick sales.
Taking the Next Steps Toward Your Mortgage
Choosing a mortgage lender isn’t just about numbers—it’s about finding a partner who aligns with your goals. After asking these questions, compare your options side by side. Schedule calls with at least three lenders to gauge their communication style and expertise. Remember, the lowest rate isn’t always the best deal if it comes with hidden fees or poor service.
Once you’ve narrowed your choices, read the fine print carefully. If something feels unclear, ask for clarification. Your mortgage will impact your finances for years, so patience and thoroughness now can lead to decades of stability.