Interviewing your Lender or Loan Officer
Interviewing your lender or loan officer is a critical part of your home loan search. The relationship should be built on trust, honesty and understanding of your needs. These 10 questions will give you an idea of what to look for in a lender to secure your mortgage.
1. What do you suggest is the best loan type for me?
A good loan officer is going to investigate your needs before recommending a loan option. If your lender suggests loan programs without assessing your needs first, they are more than likely following a trend of popular loan types that might not meet your specific requirements. You should choose a lender who gathers information in the beginning stages and then offers their best analysis. To get a head start, this guide will give you a brief description for all the types of loans that may be offered.
2. What is the Interest Rate and APR?
You interest rate plays a large role in determining your monthly payment amount while the APR will clarify what the true cost to lock in at that desired interest rate. This data is a good tool in comparing your lenders to one another and what they can offer you.
3. Are there any points to secure this mortgage?
A point is normally called a discount point, and it’s 1% of your total loan amount. Lenders will require point paid if you want to pre-pay the interest. They can also charge an origination fee on top of the discount point, so it’s important you understand where all the fees are derived from. Keep in mind, a discount point may be tax deductible so please consult with an accountant come tax season.
4. What kind of fees will I incur?
A Good Faith Estimate (GFE) will show all fees associated to securing your mortgage. Common fees are:
- Attorneys Fee
- Recording Fee
- Appraisal
- Credit Report
- Property, County and State taxes
5. Do you have a Good Faith Estimate guarantee?
Your lender is required by law to supply a GFE to you within 3 days of completing an application. Most lenders consider this to be when your credit report has been run.
6. Do you offer a rate lock and a float down process?
Locking your loan secures your rate for a certain period of time. Normally lock periods are 30, 45, 60 or 90 days. Use your best judgment and your lenders advice on deciding the right time to lock in. A float down option means you lock your loan, however, if rates improve you would float your old rate to the new, lower rate. Most lenders have a float down option that will allow you to float down one time during your loan process.
7. Will I have a pre-payment penalty?
A pre-payment penalty can offer you a lower rate than a loan without a penalty. Take caution in these loans because it may be harmful to you in the event of refinancing or selling before the penalty expires. There are two (2) types of penalties:
- Hard pre-payment penalty – penalty for selling or refinancing before expiration.
- Soft pre-payment penalty – penalty for refinancing before expiration.
Pre-payment penalties are normally 1–5 years and can have a fee between 2%-6% of your original loan amount.
8. Do you approve loans In-House?
Loans are approved by an Underwriter. It will make a difference in turnaround time if the Lender has an “in-house” Underwriter of if they have to send the files out to be approved.
9. How long will it take to close my loan?
The average time to process your loan is 20-45 days.
10. Are you receiving a Yield Spread Premium (YSP)?
YSP is a commission given to the lender for their business. Some lenders are willing to offer it to the borrowers as a credit which may be used towards closing costs. Do not be afraid to ask your loan officer about the possibility.
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