Ten Questions for Lenders

1. “What is the interest rate that you are offering on the loan?” Keep in mind that if the loan is an adjustable or a reset loan, the borrower will want to know the index, the margin, the initial rate period, the adjustment period, the adjustment period and life of loan caps, the conversion option details, and any risk of negative amortization- if any.

2. “What are the discount points and loan origination fees on this loan?” The borrower will also want to know whether these are costs that are going to be paid out of pocket or added in to the loan amount.

3. “What will be the anticipated closing costs on this loan?” An agent will advise borrowers on these estimated costs, though by law, the lender is required to provide a good faith estimate. An agent should review other fees with their broker and a title/escrow representative. The agent should advise the buyers they will want to know the total cash up front required, including their down payment and the closing costs.

4. “What is your lock-in period for rates and points and for how long do you make this commitment?” Lock commitments do vary from lender to lender and you may want to advise borrowers to find out if this commitment works both ways and if rates and/or points should go down rather than up. They may want to ask the lender if they offer a “float-down” lock-in commitment and what fee they charge for it.

5. “Does this loan have any prepayment penalties and how much are they?” Most F.N.M.A./F.H.L.M.C.-conforming loans (along with F.H.A. and V.A. loans) do not have prepayment penalties, but second loans often do. Borrowers should also ask what period of time the lender is able to charge these fees.

6. “What will be the total monthly payment on this loan and what will it include?” An agent should advise the buyers to find out the total monthly payment, which will not only include the principal, interest, taxes, and insurance, but H.O.A. fees, mortgage insurance payments, and hazard insurance payments as well. Here again the agent will want to emphasize the importance that the buyers feel comfortable and confident with this financial obligation.

7. “What do you consider to be the most important factors in evaluating my creditworthiness?” While most lenders use F.I.C.O. scoring as the method to evaluate their credit, many lenders place importance on payment history, employment, judgments and liens, new credit trade lines, and usage of existing credit.

8. “What are the documents I’m required to sign to apply for and close the loan?” The lender should be able to explain all of the documents the buyer/borrower will have to sign through all phases of processing the loan.

9. “What is your estimated time for processing this loan?” Generally, loans are taking anywhere from 30 to 45 days to process (except short sale transactions); however, some F.H.A. and V.A. loans are taking longer. An agent needs to advise the buyers to get a realistic estimate from their lender.

10. “What are some typical delays we may encounter when getting this loan processed and how can we avoid them?” This is also a very important question and a quality lender will give a very direct answer.