15 Questions to Ask a Mortgage Lender

By Bill Lyons | Published on October 20, 2023

Purchasing a home is one of the most significant financial decisions most people make in their lifetimes. With the wide availability of mortgages and various options among lenders, the process can be exciting and overwhelming, even if you’ve purchased a home before.

It’s crucial to know what questions to ask a mortgage lender to ensure you’re making the right choices and fully understand the commitment you’re about to make. Thoughtful questions demonstrate your preparedness and can inform you about vital details that may influence your borrowing experience and financial future.

Keep reading to discover the 15 essential questions to ask your mortgage lender to ensure you get the clarity and assurance you need to continue your home-buying journey.

1. What Are Your Income Requirements?

When you’re looking for a mortgage, one of the primary factors lenders evaluate is your ability to repay the loan, which is largely determined by your income.

Understanding a lender’s income requirements helps you determine whether you might qualify for a home loan and prevents you from wasting time or resources if your income doesn’t meet the lender’s threshold.

In addition, asking about income requirements can help you set a realistic budget for your home search. If your lender requires a certain income level for a particular loan amount, you’ll have a clearer picture of what properties are within your financial reach.

You may also ask your lender, “Do you offer alternative income verification?” Not everyone has a traditional 9-5 job, and income sources vary. Entrepreneurs, freelancers, and self-employed individuals don’t have the standard pay stubs or W-2 forms many lenders request.

By inquiring about alternative income verification, you can determine whether the lender is flexible and understands various income structures. This is especially crucial if you fall into one of these non-traditional employment groups.

Some lenders also have specific mortgage programs for those with unique income situations. Asking about alternative income verification can help you find these tailored solutions to increase your chances of loan approval.

2. What Credit Score Do I Need to Qualify?

Your credit score represents your creditworthiness and helps lenders determine whether you qualify for a mortgage and the loan terms. Asking a lender what credit score you need can help determine whether you qualify for a particular type of loan.

If your score is above their threshold, which can range as low as 550 for some loans but often 680 or higher, you can proceed with the loan pre-approval and application process. However, if your credit score is low, you may have to do the work to improve it before officially applying.

Keep in mind that those with higher credit scores might receive more favorable terms, such as lower interest rates.

3. What Kind of Documentation Is Required to Apply for a Mortgage?

This is one of the most important questions to ask a mortgage lender for first-time home buyers because it can streamline the application process. Borrowers can gather and organize their financial records in advance, leading to quicker responses and potentially faster loan approvals.

Whether it’s proof of income, employment verification, or details of existing debts, these documents substantiate your financial stability and prove your ability to repay the mortgage.

In general, expect to provide your lender with the following documents:

• Proof of income: Regular employees can provide W-2 forms from the past two years, recent pay stubs, income tax returns, and proof of additional income. Self-employed individuals should provide at least two years of tax returns, bank statements, and a year-to-date profit and loss statement.
• Proof of assets: Proof of assets include bank statements for checking and savings accounts, statements for other investments, such as stocks for retirement accounts, and other real estate or valuable assets you might own.
• Down payment: You must provide documentation about the source of your down payment to prove it’s legal and not from an undisclosed loan.
• Employment verification: Lenders may verify employment by contacting your employer or requesting an employment verification letter. Individuals who have recently changed jobs may require additional documentation.
• Property information: If you’ve already chosen a property, you must provide details about it. Documentation may include a purchase agreement, property tax assessments, and recent tax bills.

You may also need to provide documentation regarding forbearance, defaults, or foreclosure on a previous property. If you’ve dealt with financial hardship before, asking questions like “Does forbearance affect getting a mortgage,” can help you determine if now is the right time to apply.

4. Do You Offer Mortgage Pre-Approval?

Mortgage pre-approval is a preliminary assessment of your financial situation, allowing a lender to evaluate your creditworthiness before estimating the loan amount you might qualify for.

Asking a lender about mortgage pre-approval is a strategic move because it clarifies your budget, allowing you to focus your search on homes within your financial reach.

It also gives you negotiation power once you find a home you want to make an offer on. Sellers often prefer pre-approved buyers because it proves they’re more serious and financially stable. This puts you in a more favorable position if a seller is contemplating multiple offers.

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5. How Long Is Pre-approval Good for?

Mortgage pre-approval comes with an expiration date. So, how long is a pre-approval good for? The validity period of mortgage pre-approval is typically 60 to 90 days, but this varies by lender.

Knowing this timeframe is crucial because it sets a defined window during which you have a clear sense of your purchasing power.

If your pre-approval expires, you might face uncertainties regarding your loan amount and terms. Additionally, delays could jeopardize your home purchase.

Your pre-approval letter will have the expiration date listed on it, giving you a clear deadline for when it’s time to re-apply if you still haven’t found your dream home.

6. What Is the Best Mortgage Program for Me?

Mortgages aren’t one-size-fits-all. With so many mortgage programs available, each has its pros and cons and is suited for particular types of borrowers and situations. By providing your lender with information about your financial situation, they can help you find the best loan program.

This is crucial because the right mortgage can help you save over the life of the loan and ensure you’re not overextending yourself when it comes to monthly mortgage payments.

Whether it’s a fixed-rate mortgage for those seeking predictability in payments or a non-QM mortgage best suited for self-employed individuals and real estate investors, the right choice can save you thousands of dollars over the life of the loan.

7. How Much Will I Need for a Down Payment & Fees?

Different loan programs have distinct down payment requirements. Asking your lender about these fees can help you find the best option. The down payment is a percentage of the property’s purchase price that can significantly influence your monthly mortgage payments and interest over the life of the loan.

Can you buy a house with no money down? You may qualify for loans allowing zero percent down payments, like VA or USDA loans. However, the more you put down, the less you’ll need to borrow, so your monthly payments will be smaller if you do so.

By understanding the minimum down payment requirements for different types of loans, you can determine whether you have enough to buy or need to continue saving.

Other questions you should ask your lender include:

• Do I qualify for any down payment assistance programs?: Many lenders, in partnership with governmental and non-profit organizations, offer down payment assistance programs designed to help first-time homebuyers, individuals with low to moderate incomes, or borrowers in particular professions like emergency service workers. By inquiring about these programs, you could potentially save thousands of dollars on your down payment.
• Will there be an origination fee?: Not all lenders charge origination fees, but most do. This fee is what lenders charge for processing, underwriting, and funding a mortgage. The fee can vary widely among lenders and may be a fixed amount or percentage of the loan amount.
• Do You Offer Discounts of Fees or Closing Costs? And are they negotiable?: How much you need for closing costs will vary by lender. Some lenders might offer discounts on fees or closing costs as part of a promotional package. Additionally, some lenders might be willing to negotiate on closing costs. Before applying for a mortgage, you should know the closing costs to ensure you’ve properly budgeted for the home purchase.

8. Will I Have to Pay Mortgage Insurance?

Mortgage insurance can significantly impact your monthly payments and the overall cost of your loan. For conventional loans, mortgage insurance is required when the borrower makes a down payment of less than 20% of the home’s purchase price.

While putting down less than 20% on a home is possible, it means an additional monthly expense. Understanding whether you’ll need to factor this into your budget can help determine the loan’s affordability.

9. What Will My Interest Rate & APR Be?

The interest rate and Annual Percentage Rate (APR) are two of the most critical components of your mortgage because they directly influence your monthly payments and the total cost of the loan. The interest rate is a straightforward representation of the cost of borrowing money.

On the other hand, the APR provides a broader perspective and includes the interest rate and other costs like lender fees, mortgage insurance, and other loan-related charges.

By understanding these numbers, borrowers can compare loan offers more effectively, considering both how interest rates affect monthly payments and how APR affects the total cost of the loan.

10. How Much Will My Monthly Payment Be?

Understanding your monthly mortgage payment is crucial for budgeting and determining the affordability of your home loan. This amount encompasses the principal and interest of the loan and includes additional expenses like:

• Property taxes
• Homeowners insurance
• HOA fees
• Mortgage insurance

Knowing how much your monthly costs will be ensures you can manage your finances without overextending yourself.

11. Can I Lock in My Mortgage Rate?

The ability to lock in a mortgage rate offers more predictability as it shields you from potential rate hikes during the mortgage processing period. Typical rate lock periods are 30, 45, or 60 days.

You should also ask your lender, “Do you charge to lock in an interest rate?” Most lenders don’t charge to lock in the initial rate after the mortgage application. However, if you believe your closing might take longer than usual, some lenders allow you to extend your rate lock for an additional fee.

In addition, some borrowers may choose to lock in a rate as soon as they complete the mortgage application, while others might wait until the loan is approved. The right choice for you depends on the market conditions and risk tolerance.

The earlier you lock in your rate, the less time you might have to close the deal.

12. Do You Offer Mortgage Points?

Mortgage points, or discount points, are fees borrowers can pay to a lender at closing in exchange for a reduced rate on their mortgage. By paying more upfront, borrowers can secure a lower interest rate that results in significant savings over the life of the loan.

One mortgage point is equal to the equivalent of 1% of the loan amount. Therefore, for a $400,000 mortgage, one point would cost $4,000. The reduction in the interest rate varies by lender but typically ranges from 0.125% to 0.25%.

By asking your lender about mortgage points, you can determine whether it’s viable to pay more now to save in the long run.

13. What Are Your Escrow Requirements?

The escrow process is a protective mechanism that ensures that essential costs like homeowners insurance and property taxes are paid on time. By asking your lender about their escrow requirements, you can get clarity on the guidelines for setting aside funds in an escrow account.

Knowing these requirements can help you understand your monthly financial obligations beyond the principal and interest payments while offering insights into how the lender ensures these crucial expenses are going to be covered.

14. Who Will Service This Loan?

A mortgage lender provides the funds for you to purchase a home. In contrast, a mortgage servicer handles the day-to-day management of the loan, including collecting monthly payments, managing escrow accounts, and handling customer service. Sometimes, the lender and the servicer are the same entity, but sometimes they’re not.

Knowing who services your loan impacts the overall experience in terms of customer service, communication, and problem resolution. A seamless transition and clear communication channels are crucial. In addition, it can influence how well you can access information, make extra payments, or manage the loan in the future.

Ultimately, you need to know who to talk to about your loan if issues arise. It’s not uncommon for loans to be sold or transferred to another servicer. If that happens, you’ll receive notifications about how to make your payments.

15. Is There a Prepayment Penalty?

In some cases, borrowers might choose to pay their loans off before they’re officially due. However, paying your mortgage early can come with unexpected costs in the form of prepayment penalties.

These penalties exist because lenders anticipate certain earnings through interest payments. If you pay your mortgage off early, they earn less interest, so they may charge prepayment penalties to mitigate this risk.

Finding out if there’s a prepayment penalty attached to your loan can help you determine if you’ll have to pay additional costs for settling your loan earlier and plan accordingly.

Comparing prepayment penalty policies can also be a deciding factor when choosing between lenders, especially for those looking for more flexibility.

Work with Griffin Funding to Buy a Home

Asking your mortgage lender the right questions can help you determine whether they’re the right partner for you and ensure you find the best mortgage program based on your unique circumstances. These questions can guide you toward a more informed decision while setting the foundation for a positive relationship with your lender.

Choose Griffin Funding as your trusted mortgage lender. We’re dedicated to providing clarity and support every step of the way. Our team’s commitment to transparent communication ensures you always have the answers you need. Apply for a home loan with us today.

Bill Lyons

Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 22 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 10 years in business.