Taking out a mortgage is likely one of the biggest financial steps of your life. The application process involves sharing sensitive information about your finances. While mortgage rates and terms should factor into your decision, choosing a lender you trust is equally important.
To find the best lender for your purchase or refinance, contact several banks, brokers or mortgage companies and ask for quotes. Have a conversation with a loan officer at each one.
10 Questions to Ask a Mortgage Lender
The answers to these questions can help you determine which lenders operate in your comfort zone and best meet your expectations. Pay attention to how quickly they return your calls, texts or emails. Compare their answers to help make your choice.
Will You Provide a Loan Estimate or a Worksheet?
Find out if you’ll receive a formal Loan Estimate (LE) form, which discloses the loan’s rate and terms and provides certain consumer protections. Otherwise, you’ll get a worksheet or loan scenario, which doesn’t obligate them in the same way. Lenders are required by law to issue an LE within three days if you apply for a mortgage, but many will give one to you beforehand if you ask. They should also tell you how long an estimate is valid.
[Read: Best Mortgage Lenders]
What Information Do You Need From Me?
Without certain information from you, lenders can’t provide meaningful mortgage quotes. They need an estimate of your credit score, what sort of property you want to finance and how you’ll use it (primary residence, vacation home or rental), and how much you have for a down payment. You’ll want to consider if you’re comfortable sharing the information the lender requests.
What’s Your Preapproval or Prequalification Process?
Lenders generally offer the opportunity to share some preliminary information and receive an estimate of how much they’re likely to lend to you. This is called mortgage prequalification, and the process can vary widely among lenders. Some issue a letter based on what you tell them, while others perform a soft check on your credit.
Mortgage preapproval generally involves completing an application, authorizing a credit report and submitting income and asset documentation. However, not all lenders use the terms prequalification and preapproval the same way. It’s smart to ask what they offer and what they require. You’ll also want to know if they charge an application fee at this stage.
What Loans Do You Offer?
A lender that offers a wide range of loan programs might be better able to find a loan that’s well-suited to your circumstances. For instance, if you’re a first-time homebuyer, you might be better off with a lender that offers high loan-to-value products or down-payment assistance programs so you don’t have to put a lot of money down.
You could have more flexibility if a lender provides multiple loan options. Christy Bunce, president at New American Funding, recommends looking for lenders that offer renovation loans so you aren’t restricted to shopping for homes in pristine condition.
“You want to know that your lender can do a renovation loan and things like that, because that’s really where the buyers are having a little bit more bargaining power when prices are so high and rates are so high,” she says.
[READ: Compare Current Mortgage Rates]
Which Loan Do You Recommend for Me and Why?
Lenders should be able to explain why they recommend one mortgage product over another. If they can’t walk you through their reasoning, it could be that they haven’t given the question enough thought or they don’t have your best interests in mind.
Andrea Altamirano, vice president and mortgage loan program manager at Sunrise Banks, suggests reviewing your worksheets — or if you’re far enough along in the process, your Loan Estimates — with loan officers to gauge their recommendations.
“You can ask your lender, ‘Hey, just wondering, why do you put me in an FHA 30-year fixed?’ Or ‘Why am I in a conventional loan?’ That way, you are really going to have straight answers from your lender because you have that information in front of you,” says Altamirano.
How Quickly Can I Close?
Ask how long it usually takes for the lender to close on a home purchase or refinance. This gives you an idea of how responsive they are and whether they can work with your timeline.
If you’re already under contract, let the lender know. Make sure your the close of escrow date can be met.
How Do I Keep in Contact?
Choose a lending pro who’s willing to communicate using your preferred method, whether that’s email, text, video calls, phone calls or in-person meetings. If you want to track your application online, make sure that’s offered and that the website is user-friendly.
If you want to stay in touch by phone, look for a direct office or mobile number for your loan officer so you aren’t stuck calling the company’s 800 number. Try contacting the lender with a question to see if they respond promptly.
“Definitely ask your lender how they feel about it. Because for me, a quick call with a person that’s helping me, it’s more realistic and it’s more efficient,” says Altamirano.
How Much of the Mortgage Process Is Handled In-House?
Some lenders take care of underwriting in-house, while others contract with outside firms. The application process might be more streamlined if the lender isn’t waiting for answers from another company.
“If they’re dealing with an in-house direct lender, then they’re underwriting their own files, they’re processing their own files, they’re drawing docs, they’re funding. So there’s a lot more control there,” Bunce says.
And if maintaining a long-term relationship with the same lender is important to you, you might want to ask if the lender services its own loans.
[See: Best Low-Down-Payment Mortgages]
Are You Involved in the Local Community?
Find out how long the lender has been in business. See if it has local management or ties to community organizations. It might be safer to choose a lender with many years of experience and a strong reputation in your neighborhood than one with a brief track record.
Do You Understand My Cultural Background?
You may want to consider if a lender is inclusive and sensitive to cultural concerns, especially if you have any unique needs that not all lenders understand. Bunce says it can be helpful for lenders to reflect the diversity of the communities they work with because this can prevent roadblocks in the loan process.
“We think that that really does help with the loan officer-customer relationship as well, that they understand what they’re going through,” she says.
For example, if receiving down payment gift funds from extended family members is standard in your culture, you might prefer a loan officer who’s used to that practice rather than one who will question it.
Not all mortgage lenders are created equal, and some look better on paper than they are in real life. Getting personal with a few candidates can help you get a better feel for how they’ll work with you.
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How to Find the Best Mortgage Lender: 10 Questions You Should Be Asking originally appeared on usnews.com
