Mortgage
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LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

15 Key Questions To Ask a Mortgage Lender

Updated on:
Content was accurate at the time of publication.

For most people, taking on a mortgage will be the biggest financial commitment of their lives. The best way to ensure you’re well-equipped to navigate the homebuying process is to ask the right questions.

We’ve compiled a list of common questions to ask your mortgage lender to ensure that you’re informed and confident during the homebuying process. Whether it’s your first home or your third, these mortgage questions will help you compare lenders and choose the best loan for you.

Most buyers are familiar with the most common type ⁠— conventional mortgages ⁠— but there may be other types of loans that better suit your needs.

Lenders can usually help you navigate and apply for the following standard loan types:

  • Conventional loans: There are several types of conventional loans, but they’re tougher to qualify for than loans backed by a government agency. You’ll typically need a credit score of 620 or higher and a down payment of at least 3%. However, if you want to avoid paying private mortgage insurance (PMI), you’ll need to put at least 20% down.
  • FHA loans: Insured by the Federal Housing Administration (FHA), borrowers can qualify for these loans with as little as a 3.5% down payment and credit scores as low as 580. However, you’ll have to pay two different types of FHA mortgage insurance, regardless of your down payment amount.
  • VA loans: Military borrowers may qualify for a VA loan if they served long enough to earn VA entitlement. VA loans don’t require a down payment or mortgage insurance, and the VA doesn’t set a minimum credit score to qualify. You’ll also have to pay a VA funding fee between 0.5% and 3.3%, unless you’re exempt because of a service-related disability.
  • USDA loans: The U.S. Department of Agriculture (USDA) offers home loans to help low- to moderate-income families purchase homes in rural areas. No down payment is required and loan terms can extend past 30 years. Credit scores of roughly 640 are required, though other qualifying factors may be considered in lieu of credit and the USDA doesn’t set a strict minimum. Income limits apply.

Many of the mortgage types listed above come with standardized minimum requirements, but lenders are free to be more strict — and they often are. Since not every lender has the same requirements, it’s important to seek out one that works with your financial situation and the loan program you’re interested in.

In general, this is what lenders will look for to approve your mortgage application:

  • Credit score requirements:

    • Conventional loans: 620+
    • FHA loans: 500 to 579 with a 10% down payment, 580+ with a 3.5% down payment
    • VA loans: Most VA lenders require at least a score of 620, though some may accept scores as low as 500.
    • USDA loans: 640+
  • Income requirements:

    • DTI ratio: Your debt-to-income (DTI) ratio compares your monthly debt payments (including the new mortgage) to your gross monthly income. Lenders calculate what you can afford to borrow based on this figure, and may not approve you for a loan if it pushes your debt obligations above 43% of your monthly gross income.
    • Employment history: In addition to income, lenders will review your employment situation and may require two years of consistent employment history.

Don’t fall for the myth that you need a 20% down payment to buy a home. A large down payment will gain you a lower monthly payment, but many loan programs require very low or no down payments at all. Here are the minimum requirements for common loan types:

  • Conventional: 3%
  • FHA: 3.5%
  • VA: 0%
  • USDA: 0%

You can also use down payment assistance programs to reduce the burden of coming up with a down payment.

A loan’s “term” is the length of time you have to repay it, and this seemingly minor detail will have a major impact on your monthly payment amount. Most lenders offer 15- and 30-year mortgage loans, but if a less common repayment period will work better for you, shop around — you should be able to find a mortgage with any loan term between 8 and 29 years without much trouble. The important thing to understand is how the loan term you choose affects your monthly payments, interest rate and total loan costs.

  • 15- vs. 30-year mortgage: A 30-year repayment term is the most common because it provides the lowest monthly payment. However, a 15-year repayment term can be a good option for those homeowners who are able to afford a higher monthly payment. A shorter term can save you hundreds of thousands of dollars over the life of the loan compared to a 30-year term.
  • 10-year mortgage: The interest rates on 10-year mortgages tend to be lower than 15- or 30-year loans so, as long as you can afford the higher payments, a 10-year mortgage might be a great way to find a low-cost loan.
  • 40-year mortgage: This is the longest loan term you’re likely to find, but they’re usually only offered to homeowners who are already in a loan and experiencing financial distress. If you want to access a 40-year mortgage outside of a loan modification program, you’ll need to find a non-qualified mortgage (non-QM) lender, since any mortgage with a term longer than 30 years falls into a class of higher-risk mortgages known as non-QM loans.

It’s important to compare loan offers when shopping for a loan, but be sure to look at both interest rates and annual percentage rates (APRs). The interest rate is how much the lender will charge you for borrowing money, but an APR is a much more inclusive figure, and will more accurately represent the total cost to repay your loan. Here’s the difference:

  • Interest rate: The rate a lender charges you for borrowing money, typically calculated as a percentage of your remaining balance each month.
  • APR: The annual cost of owing money to your lender, including your interest rate plus all of the lender’s other fees, like closing costs and origination fees.

In addition to a down payment, closing costs are the other major expense involved in buying a home. Closing costs typically range between 2% and 6% of the loan amount, and they cover a number of fees involved with taking out your loan, including:

Origination fees
Application and underwriting fees
Appraisals and inspections
Title fees and insurance
Recording fees

In some cases, you may be able to negotiate with your lender to reduce your closing costs, or negotiate to have the seller cover a portion of them.

It’s not uncommon to pay a small fee for a credit report if you’re getting a mortgage preapproval, but you should never be charged a fee to have a loan estimate prepared or speak with a loan officer about your situation.

You can find all of the important details about closing costs and fees on the second page of your loan estimate, but it may not specify whether you have to pay any of those fees in advance. If you have any doubts or confusion, review the loan paperwork with your loan officer and confirm you have a thorough understanding of what you’ll be charged and when.

There are several different types of mortgage insurance that a lender may require you to buy. One way to avoid or reduce your insurance costs is to explore alternative loan types. You may also be able to reduce insurance costs by improving your credit score or reducing the amount of debt you carry before applying for your mortgage.

Your lender may even offer a piggyback loan, which can help you avoid paying PMI. However, there’s no way to avoid FHA mortgage insurance unless you choose a different loan type — it’s required regardless of your down payment amount.

Some lenders allow you to reduce your interest rate by buying mortgage points — for every point you buy, you’ll reduce your interest rate by up to 0.25%. The amount you pay for points is essentially an upfront interest payment, but each lender has its own way of calculating the exact cost of a point. That’s why it’s important to get rate quotes, compare lenders’ pricing structures and calculate whether buying points will actually save you money on your overall loan repayment.

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Don’t be pressured into buying mortgage points

Lenders sometimes bake mortgage points into their rate offers without making that fact abundantly clear. To be sure, you should read your loan estimate carefully and ask your loan officer directly.

Borrowers have also reported feeling pressured by lenders to buy points. If your lender won’t allow you to remove the points from your loan terms in exchange for a slightly higher interest rate, you can use loan offers from other lenders to negotiate. If they still won’t budge, you need to consider taking your business elsewhere.

If you get approved for a great, low rate from one of your potential lenders, you may want to lock in that rate. Mortgage rates fluctuate daily, and having your loan unlocked (known as “floating” in lender lingo) could cause your rate to change significantly before you close on your loan.

Rate locks generally last for 30, 45 or 60 days. If you haven’t made it to closing by the end of that time period, you can usually extend the lock for an additional fee.

Depending on where you live and how much you earn, you may be able to qualify for assistance that covers some or all of your down payment. State housing agencies often offer first-time homebuyer programs with financial aid provided by government grants, citywide homebuyer programs or assistance through your employer, and you may even be able to use multiple programs together.

Ask lenders which down payment assistance (DPA) programs they work with, and whether you qualify based on your income and where you’re buying. Not all lenders are approved to offer DPA loans, so you may need to locate a list of approved lenders if you’re interested in a particular program.

It’s rare, but some lenders may charge a fee for “prepayment” if you pay off all or part of your loan balance within a certain time period. You can find this information on the first page of your loan estimate or, prior to closing, on your closing disclosure.

Paying off your mortgage early is one of the best ways you can reduce the amount of debt you owe and save on interest. Interest is charged based on the remaining balance that you have each month, and making early payments reduces your total interest charges.

Time frames for processing a loan can vary from one lender to the next, and the timeline for government-backed loans can be on the longer side. As such, it’s important to ask the lender about timing up front — especially if you’re buying and selling a home at the same time, or just need to stick to a specific timeline.

For a conventional loan, it could take about 42 days to complete the purchase process from application to closing. FHA loans are only slightly slower, taking around 43 days, while VA loans take the longest at 40 to 50 days.

An escrow account is a special account set up by your lender to pay certain costs associated with your home purchase, like property taxes and homeowners insurance. Since the lender collects the funds as part of your monthly mortgage payment and then pays the bills on your behalf when they’re due, you don’t have to worry about missing a payment. On the other hand, this adds a line item to your mortgage payments and takes a measure of control away from you.

Escrow accounts are usually required if you have an FHA, VA or USDA loan. If you have a conventional loan, however, you may be able to opt out of an escrow account — if you made at least a 20% down payment.

The company that lends you the mortgage may not be the same company you deal with down the line. That’s because some lenders sell mortgages to other companies that “service” the loans, handling things like billing and account management.

Ask your loan officer if your mortgage will be transferred to a loan servicer after closing — that way, you can be prepared to deal with a different agency. You’ll also receive notices from both the lender and the servicer if your loan is later transferred.

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