Questions to Ask Your Mortgage Lender As a First-Time Buyer

Buying your first home is an exciting milestone, filled with dreams of finding the perfect place to call your own. But before you start picking out paint colors, there’s an important step to take: securing a mortgage.

In this article, we’ll discuss some of the most overlooked questions that first-time homebuyers should ask their mortgage lenders. These crucial queries can save you time, money, and stress. So, let’s get you prepared to become a confident and informed homebuyer.

In this article (Skip to...)

• Why asking the right questions matters?
• First-time homebuyer questions to ask a mortgage lender
• The bottom line

Why asking the right questions matters?

When you’re on the exciting journey of finding your dream home, it’s super important to ask your mortgage lender the right questions. Why? Because you want to fully understand your mortgage loan terms and avoid any unexpected surprises down the road.

By getting clear on interest rates, loan options, and origination fees, you’ll be making an informed decision and finding the best deal that fits your financial situation. Plus, knowing these details upfront can save you from future headaches and give you peace of mind throughout the whole homebuying process.

First-time homebuyer questions to ask your mortgage lender

Now that you know the importance of asking the right questions, let’s dive into the 10 most overlooked questions first-time homebuyers should ask their mortgage lender.

1. What are the total costs of the loan, including all fees?

Mortgage loans come with costs beyond the down payment. You also need to cover closing costs, which include fees like loan origination, appraisals, and other third-party fees.

If you don’t understand these costs, you might face unexpected expenses right before closing. However, if you know your costs upfront, you can plan your finances better and choose the most affordable options.

2. Are there any lender credits to offset closing costs?

Mortgage closing costs can range from 2% to 5% of the loan amount — in addition to your down payment.

Fortunately, some lenders can provide a credit (or another option) to offset this expense. A credit is cash to cover some or all of your closing costs (if you agree to a higher interest rate).

Additionally, you might be able to roll the closing costs into your loan.

3. Are there any first-time homebuyer programs or discounts I qualify for?

The down payment requirement is one of the biggest hurdles to buying a home, usually requiring 3% to 5% of the home purchase price.

As home prices rise, this results in paying more out-of-pocket, which can be tough for first-time buyers without equity from a previous home.

Ask your lender about first-time homebuyer programs. If you’re eligible, you might qualify for a lower interest rate or down payment assistance programs. Both can make homeownership more affordable and accessible.

4. How do you handle rate locks and what are the costs and conditions?

Interest rates can change quickly, and since it can take 45 to 60 days to close on a property, the initial rate quoted by your lender could increase before closing.

A higher rate means a higher monthly payment, so talk to your lender about locking your rate to protect against potential increases during the loan process.

Rate locks can expire, though, so make sure you have one that’s long enough for your circumstances. The cost of a mortgage rate lock can vary from 0.25% to 0.5% of the mortgage amount.

5. Can I get a loan estimate for different types of home loans?

Mortgage loans are not one-size-fits-all, so there are various types to choose from. This includes a fixed-rate mortgage and an adjustable-rate mortgage, as well as different programs such as government-backed loans (FHA, VA and USDA) as well as conventional loans.

It’s important to understand all your loan options. Therefore, ask your lender for a loan estimate for different types of mortgage loans to help you choose the best mortgage to fit your circumstances.

A loan estimate includes important details about your mortgage, such as the estimated interest rate, monthly payment, loan closing costs, and other key information.

6. Can you explain the loan estimate and closing disclosure forms?

While the loan estimate is a document you receive within days of submitting your mortgage application, the closing disclosure is the final document you’ll get a few days before closing. It details your actual mortgage terms.

Review your closing disclosure and compare it with the loan estimate before closing. Your lender will likely send this via email, but they’re available to answer questions or clarify details.

7. What is the estimated time frame for loan approval and closing?

Buying a house is a lengthy process, and the time from loan prequalification to closing can vary depending on the lender.

Ask your lender about their average timeline for closing, which can range on average from 45 to 60 days. This information is crucial for coordinating and scheduling your move.

Understand that delays are possible, so it’s important to provide any additional information to your lender as soon as possible to keep closing on schedule.

8. How are my property taxes and homeowners insurance escrowed?

Mortgage payments include repayment of principal and interest. In addition, you’ll likely pay property taxes and homeowners insurance with your monthly mortgage payment, if you have an escrow account.

This account sets aside funds for these expenses, which are then paid annually. However, some homebuyers don’t fully understand how escrow works.

Occasionally, there might be a shortage in your escrow account at the end of the year. If so, your monthly payment will likely increase to cover this shortage and ensure there’s enough funds for future expenses. Therefore, it’s important to monitor your escrow account to avoid surprises.

9. Can you provide a breakdown of the monthly mortgage payment?

Keep in mind that your monthly mortgage payment is divided among various expenses, not just repayment of principal. Your mortgage lender can explain how much of your payments cover principal, interest, property taxes, homeowners insurance, and mortgage insurance (if applicable).

In the early years of your home loan, a significant portion of your payment will go toward interest, so your principal balance decreases slowly during this time.

Understanding this breakdown helps you know how your mortgage payments affect your loan balance over time, which manages your expectations better.

10. How will my loan be serviced after closing?

It might surprise you, but the mortgage company that issues your loan might not be the one servicing it. After closing, it’s common for another institution to service or manage a mortgage.

They handle tasks like processing payments, creating bills, and answering questions. Therefore, you might not send payments to the original lender.

Knowing which company will service your loan helps avoid surprises after the loan process.

Bottom line

Navigating the mortgage process as a first-time homebuyer requires asking the right lender questions, tailored to your unique situation. By understanding the costs, available programs, rate locks, and loan servicing, you can feel confident and have a positive home buying experience.