Questions You Should Ask Your Mortgage Lender On Loan Process

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This BLOG On Questions You Should Ask Your Mortgage Lender On Loan Process Was UPDATED And PUBLISHED On February 7th, 2020

What questions should you ask your mortgage lender about the credit process

Choosing the right mortgage lender is key.

  • Buying a home is a person’s single largest investment in their lifetime
  • The average home loan amount is $327,000 in the United States
  • California has one of the highest home prices in the nation and average homes in the state of California is priced at $585,700
  • Most homebuyers do not have the cash to purchase a home so they need to finance it
  • The mortgage industry is quite complex
  • Homebuyers, especially first time home buyers, need to educate themselves
  • Borrowers need to do a lot of due diligence in not just the home buying process but the mortgage process as well
  • Many borrowers will search the internet and run into situations where they read conflicting reports
  • The mortgage industry is extremely regulated
  • But there are still advertisers who advertise home loans but are not actual lenders
  • Be careful on websites where they are lead generation websites and not actual lenders
  • Never input personal information on online websites that is not an actual mortgage lender
  • Many times these non-lender websites are lead generation websites
  • They will sell consumer names to multiple mortgage companies for the borrower’s contact information

In this article, we will discuss and cover Questions You Should Ask Your Mortgage Lender On Loan Process.

What Are Mortgage Lender Overlays?

Not all lenders have the same qualification requirements.

  • For example, a local bank may require a 640 credit score
  • They may also require that all collections and charge off accounts be paid off
  • However, under HUD Guidelines, homebuyers can qualify for FHA Loans with outstanding collections and charge off accounts with a 580 credit score
  • Even though a borrower may meet all HUD lending requirements lenders may have higher lending guidelines called overlays
  • Overlays are mortgage guidelines that are above and beyond those of FHA, VA, USDA, Fannie Mae, and Freddie Mac minimum mortgage requirements
  • Gustan Cho Associates is a national mortgage company with no overlays on government and conventional loans
  • As long as borrowers meet minimum federal mortgage guidelines, we can qualify borrowers and not just close their home loans but close them on time

Borrowers with less than perfect credit and who have outstanding collections, charge offs, and/or higher debt to income ratios need to ask the loan officer what types of lender overlays they have.

Choosing The Right Lender And Types Of Questions You Should Ask Your Mortgage Lender

Before borrowers choose a mortgage loan originator to work on their mortgage application there are several questions they should ask their mortgage lender. I recommend that borrowers speak with several loan officers and ask them certain questions. Borrowers need to feel comfortable with their loan officers and get along with them.

  • The mortgage loan approval process can be sometimes grueling and stressful if the borrower has not been properly qualified
  • The main reason for a last-minute loan denial or stress during the mortgage process is because the loan officer did not properly qualify the borrower
  • There is no reason for a loan denial and/or stress during the mortgage process if the borrower was qualified properly
  • If a loan officer issues a pre-approval within a matter of hours the same day, the chances are that the loan officer did not properly qualify the borrower
  • All pre-approvals Gustan Cho Associates Mortgage Group are full credit loan approvals signed off by our underwriters
  • When we issue a pre-approval, that means that the mortgage loan file has been fully underwritten by an underwriter and the borrower has a full loan commitment
  • Our pre-approvals take about a week

All mortgage docs are fully analyzed and reviewed and the underwriter issues a full credit conditional mortgage loan approval.

Conditional Mortgage Loan Approval

Which means conditional approval of the mortgage

Conditional loan approval means that an underwriter has fully reviewed the borrower and all of the documents.

  • Once the underwriter decides the borrower meets mortgage guidelines, then the underwriter will issue a conditional approval
  • The loan file will go back to the mortgage processor and the next step is for the processor to gather conditions

The mortgage processor will then submit all conditions for a clear to close:

Example of conditions are the following:

  • Executed Real Estate Purchase Contract
  • Home Appraisal
  • Updated Bank Statement
  • Updated Verification Of Employment
  • Title Work
  • Homeowners Insurance Declaration Page

Once all conditions have been gathered and collected by the mortgage processor, it gets submitted back to the same underwriter for a clear to close.

  • Here are some of the questions that you should ask your mortgage loan originator and see how you like their responses
  • Consider it as an interview process

If you do not like the prospective loan officer’s answers, then continue shopping until you feel comfortable with a loan officer that you feel you can trust.

Loan Program Questions You Should Ask Your Mortgage Lender

Important Questions You Should Ask Your Mortgage Lender is about loan programs.

  • Even though borrowers may qualify for FHA Loans, is an adjustable-rate mortgage better for the borrower versus a fixed rate?
  • Adjustable Rate Mortgages, also known as ARM, have lower interest rates than 30 year fixed rates
  • First Time Home Buyers who are purchasing a starter home and are looking to upgrading to a larger home in five to seven years may benefit more with an ARM versus 30-year fixed-rate mortgage

Most seasoned loan officers will probably qualify borrowers by analyzing the following:

  • Income
  • Assets
  • Liabilities
  • Reserves
  • Credit reports
  • Credit scores
  • Debt to income ratios

Conventional Versus FHA Mortgages

Borrowers may qualify for both conventional and FHA Loans but which loan program would offer the best benefit for the borrower?

  • It might be FHA, Conventional, or an ARM product
  • Sometimes a borrower with phenomenal credit scores might not qualify for a conventional mortgage loan because their debt to income ratios are too high
  • The loan officer should explain to borrowers why they do not qualify for certain mortgage loan programs
  • Loan Officers should not just tell borrowers that they do not qualify but explain why

Questions You Should Ask Your Mortgage Lender is about the various loan programs available and why the loan officer is recommending a particular loan program.

Adjustable-Rate Mortgages Versus Fixed Rate Mortgages

What do variable rate mortgages mean and fixed rate mortgages?

If the mortgage loan officer recommends an adjustable-rate mortgage, ask him or her the frequency of the adjustment and the maximum annual adjustment cap

  • Borrowers should also ask him or her the cap on the adjustable mortgage which is the highest rate
  • Make sure to also ask the margin and index
  • Many times the loan officer will offer the ARM because rates are generally lower on adjustable-rate mortgages

Adjustable Rate Mortgages are a great product if borrowers do not intend on living in a new home for more than 5 years to 10 years and intend on upgrading and/or downsizing.

Buying Down Mortgage Rates By Paying Points

Home Buyers who intend on living in their home for a long time and do not intend in refinancing in the near future may want to ask mortgage loan officer if they can buy down the mortgage by paying points.

  • A point is equivalent to one percentage point of the mortgage loan amount
  • Borrowers can buy points with sellers concession

Costs Of Getting A Mortgage Loan

Besides the down payment on a home purchase, there are closing costs associated with the origination of all real estate transactions.

  • A mortgage broker may not have origination fees
  • But a mortgage broker needs to fully disclose all closing costs and fees of third-party vendors that are associated with the origination of home buyer’s mortgage loan
  • He needs to disclose to you the Good Faith Estimate which is now is called Loan Estimate
  • Loan Estimate is an estimate of all settlement and closing costs that borrowers may incur in closing the home mortgage

Examples of costs that a mortgage loan borrower may incur are the following:

  • Appraisal costs
  • Credit report fees
  • Title charges
  • Termite inspection
  • Well inspection
  • Re-inspection fees
  • Pest inspection fees
  • Roof inspection fees
  • Taxes
  • Recording fees

Turnaround Time For A Mortgage Approval

 

Other important Questions You Should Ask Your Mortgage Lender is what their turnaround time is for a mortgage loan approval and clearing conditions.

  • Underwriting turnaround times vary from lender to lender
  • Some lenders will underwrite and approve a mortgage loan application in less than 24 hours and clear conditions in less than 24 hours
  • Other lenders may take 9-day underwriting and approval turnaround time and 7 days to clear conditions
  • This is an important Questions You Should Ask Your Mortgage Lender

Home Buyers or homeowners needing to qualify for a mortgage with a direct lender with no overlays on government and conventional loans can contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. We are available 7 days a week, evenings, weekends, and holidays.

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