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Questions To Ask Your Lender When Buying A Home

Aug 21, 2018 - Posted by: Rocky Mountain Credit Union

When buying a new home, your focus may be on picking the perfect neighborhood, or maybe you are looking for a home with enough bedrooms to accommodate a growing family. 

While financing your home loan may not be the first thing you think about when you decide to embark on your home buying journey, it is an essential part of home ownership. When talking with your lender about buying a home, don't forget to ask these five questions.

What Are My Down Payment Options?

The down payment on a home loan can range from no money down to as much as 20% or more. Knowing what you can afford to put down on your home is important for your financial institution to know. This helps them to determine which loan is the best for you. Ask your lender what types of loans you would qualify for and what their down payment requirements entail.

Should I Go With a Fixed Rate or Adjustable Rate?

Fixed rate mortgages will lock in the interest rate when you sign the loan for the duration of the loan's maturity. These loans can be a great option if you are buying when the interest rates are extremely low.

An adjustable rate mortgage will have a set interest rate during a defined period, usually a couple of years, then the rate will fluctuate with the current interest rates. If interest rates are high when you purchase, this is a much better option for many home buyers. Additionally, those who may need a lower monthly payment in the beginning, or may have a lower credit rating, may find this is their best option.

Your lender should be able to provide you guidance on which loan type might be best for you in your current situation. Be sure to ask which they recommend and why it is best for you. 

What is Private Mortgage Insurance?

Private mortgage insurance, or PMI, is an insurance that covers your loan amount provided by a private insurer. This will cover the mortgage for the lender if you fail to pay the loan back and it will be added to your monthly mortgage payment. PMI is typically required on conventional loans where less than 20% is put down as well as FHA loans. Ask your lender about PMI in order to better understand how it works for you and if it is necessary for you. 

What Can I Expect to Pay For in the Closing Costs?

On average you can expect to pay between 2% and 5% of the cost of the home for closing fees. The types of fees may vary slightly, but you can most likely expect to see the following fees:

  • Application Fees
  • Appraisal
  • Closing Fee
  • Credit Report
  • Escrow Payment
  • Flood Determination
  • Home Inspection 
  • Homeowners Insurance
  • Title Insurance
  • Lead Paint Inspection
  • Termite Inspection
  • Origination Fee
  • Property Tax
  • Points (if this is part of your loan arrangement)
  • Recording Fees
  • Survey
  • Transfer Taxes
  • Underwriting Fee
  • Attorney Fees if Required

What is Involved in the Closing Process?

At your closing, you will pay all of your closing fees and escrow requirements. During the process, you can expect there to be a closing agent, a representative from the title company, the homeowners, and the lender.

You will sign all the necessary documents and when completed should receive the following items:

  • Closing Disclosure
  • Mortgage Note
  • Mortgage or Deed
  • Certificate of Occupancy (if you are buying a new home)

You can also expect to receive copies of all appraisals and inspections and finally will be handed the keys to your new home.

If you are interested in buying a home, contact one of the loan representatives at Rocky Mountain Credit Union today for more information on a home loan or to apply.

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