Questions to Ask Your Lender

September 6, 2007

Many of you may currently be shopping around for a mortgage. There have been many reports, as of late, about borrowers who didn’t fully comprehend what they were getting themselves into. As a borrower, it is your responsibility to understand what you are signing. Don’t be afraid to ask questions. After all, a mortgage may be the biggest debt responsibility that one undertakes in their life.

Kit Mueller, licensed mortgage planner, and author of the Mortgage Planner blog, is very knowledgeable about the mortgage business. The wealth of information that he provides on his blog has made me an avid reader. He is more concerned with his clients obtaining their financial goals than just closing a mortgage loan. Kit Mueller is licensed in Florida, Illinois, Wisconsin, Michigan, Indiana and Ohio. When it comes to finding a reputable lender he advises clients to ask the following questions:

1. What is the average number of days it takes for you to issue a firm loan approval?
2. Are the rates you are quoting today good 30 days from now?
3. If we are locked-in and rates go up, what is your policy if our rate lock expires?
4. What is the index on the adjustable rate from which you are quoting?
   • Can you give me a 24-month history on the movement of that index?
   • What is the margin associated with this loan?
   • Is this the best index to have? If so, why?
5. What are the total fees associated with our loan?
   • What is the difference between points and an origination fee?
6. How will this loan affect my financial goals?
   • How do I know what loan is best with regard to how long I’ll be in the home?
7. Are you closing at least 100 loans per year and/or how long have you been in the business?
8. Can I be pre-approved prior to submitting an offer on the property that I wish to purchase?
9. What is the APR on this program?
10. What percent of the loans you take actually close?

Bonus Questions (if a lender can’t answer these – run!)

1. What are mortgage interest rates based on?
2. What is the next report or event that can cause interest rate movement?
3. When Bernanke and the Fed changes rates, what does this mean and what impact does this have on interest rates?
4. What is happening in the market today and what do you foresee in the near future?

I think Kit’s questions will help borrowers become more educated about acquiring a mortgage in the future. Thank you Kit for your much appreciated advice!