Buying your first property is an important decision in one's life. According to a 2016 survey conducted by JD. Power, 27% of new property owners came to regret their choice in lenders, sooner or later. Some of the major dissatisfaction factors are lackluster customer service, lack of communication or pressure from the lender for some particular product. Most of these tensions can be easily removed by some careful decision making on your part. Here are 9 questions to ask your mortgage lenders when buying your first property.
1. What are the mortgage plans they offer for your first property?
Every individual has separate loan requirements. Choosing the best for yourself requires working with a lender who proves a wide variety of loans. Don't go with a lender who forces one type of loan on you because that's the only one available to them.
2. Do they regularly handle the type of loan you're looking for?
If the type of loan you're looking for is a bit more unconventional, than your average fixed rate mortgage, a bit more expertise is an absolute must. Make sure your mortgage lender is capable of handling your request. After all, it's your first property, and you don't want to mess up.
3. How can I know this is the best rate?
Some lenders inflate their prices to make huge profits off newcomers in the real estate market. It's in the best interest of the customer to ensure that the lender isn't overcharging you. Always compare loans provided by different lenders before deciding on any.
4. Monthly mortgage payment I'm required to make?
Fixed rate loans keep the same rate for their whole life, which may be anywhere between 10 and 30 years. Adjustable Rate Mortgages, commonly shortened as ARMs, change interest rates after an initial period at fixed intervals. Since this type of loan usually has lower interest rates compared to fixed-rate mortgages.
If you do decide to go with this type of loan, please make sure to ask and fully understand when the rates will change and by how much, how often will the rates changes after the initial period, the loan's margin, etc.
5. What are the qualifications for the type of loan I'm looking for?
Even if two different lenders are offering the same type of loan, their minimum requirements may differ vastly. For example, Department of Veteran Affairs Loans require a minimum credit of 620, but some other lender may require a minimum credit of 640. So it's in your best interest to assume that same loans may not have same terms.
6. Ask for the estimate of rates and fees you will be expected to pay?
An initial estimate can't guarantee your final expense, but it can be a bit hard measure to evaluate different lenders. However, keep in mind that rates fluctuate frequently and it's best to compare mortgage lenders on the same day to get the best comparison possible.
7. Does the loan you're looking for have any penalties on prepayments?
If you're saving up some money to pay off your mortgage principal of your first property earlier than expected, you probably will have to pay a fee. It's a vital question that you and many newcomers forget to ask when buying your first property.
8. What's the estimated time to process your home loan?
Maybe you're at the end of your current lease or want to match the timings of the sale of your previous home with the purchase of your new property, knowing the estimated processing time of the loan for your new property is a very important factor that will influence to go with the loan. It's always recommended to have a small buffer if possible because loan preparations may sometimes take longer than expected.
9. Do they have any other types of loans with lower rates that your new property qualifies for?
It's always in your best interest to ask if the lender any other type of loans that your new property qualifies for. Mortgage lenders always have more than one type of loans, and maybe they even have a type of loan that may be better suited your financial situation.
So there you have it, 9 crucial questions to ask your mortgage lenders when buying your first property. Do you agree or disagree with them? How would you improve our questions? Do you have any to tips to share? Be sure to leave a comment below!