All lenders may be a little different in terms of the types of loans and the services they offer. Talking to a variety of lenders may help you find the one that best suits your unique needs.
When it comes to home loans, there are several different types and options. For example, you can often choose from different loan lengths, with two of the options typically being 15-year mortgages and 30-year mortgages. You may also be able to select whether you get an adjustable rate, that may change over time, or a fixed-rate, which stays the same.
Lenders are all unique, too. While there may be federal guidelines for different mortgage programs, some lenders only offer certain types of loans, and they may also differ in terms of the types of services, like online application or special first-time homebuyer programs, that they offer.
Talking to multiple lenders early on, even before you’re ready to buy a home, may allow you to find more programs you may be eligible for, helping you to find the right mortgage for you.
[Video title: Four of the questions to ask a potential mortgage lender]
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As you explore the homebuying process, you’ll probably realize there are several types of mortgages and lenders. It’s important that you find the right type of mortgage with the options that best fit your unique needs.
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One of the most effective ways to get started is to ask a potential mortgage lender, such as a bank or credit union, some questions. Here are four examples.
1. What types of loans do you offer?
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First, make sure any lender you’re considering offers the length of loan you’re looking for: Some common terms are 30 years and 15 years, which means that’s how long it would take you to pay them off with a regular monthly principal and interest payment.
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Then ask about what types of interest rates are offered. A fixed rate means your interest rate will never change during your loan term. With an adjustable-rate loan, after an introductory period, your interest may go up or down, which could potentially increase your monthly principal and interest payment.
2. Do you have special programs that can help homebuyers?
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If you’re a first-time homebuyer, you may be surprised to know that there are several federal and local programs that may be able to help you put together money for a down payment in order to help you purchase a home.
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Ask a potential lender if you’re eligible for these programs. Some lenders may offer their own lower-down-payment mortgage options or grants to assist with your down payment or closing costs.
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The lender may ask you some basic questions, like whether you’re a veteran of the military or a teacher, to see if you qualify for special programs for certain groups.
3. What sort of interest rate might I qualify for? What other factors go into your APR?
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As you begin to consider different lenders or different types of loans, keep in mind that interest rate and annual percentage rate, or APR, are different.
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The APR is the loan’s cost including the interest rate, applicable closing costs, and points.
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If you provide some basic information on your credit score and the type of loan you’re considering, lenders may be able to give you a rough estimate of the interest rate and APR on different types of loans. Keep in mind that these are estimates, and not official — you won’t know the actual interest rate and APR until you submit a formal application. But it can give you a good idea of the cost of a loan at each financial institution.
4. What fees do you charge as part of the lending process?
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No one wants to be surprised with fees they weren’t expecting, so it may help you to ask about all the fees associated with getting a mortgage at a certain lender.
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Some common fees include an origination charge, which is an up-front fee the lender charges for making the loan. Other items to ask about are any prepayment penalties for paying off the mortgage early.
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By asking questions of potential lenders, you may end up with a better idea of which lender offers the products, options, and services that can help make your mortgage application experience easier.
[Text on screen: A Wells Fargo home mortgage consultant may be able to help you understand what options make sense for you.]
When it comes to your home mortgage, you’re in charge of which lender you decide to use. Take the time early on to talk to several different lenders to determine which one may best fit your needs. You should be able to do this without a credit check or any other obligation.
Once you’ve narrowed your list and identified the home you want to buy, your next step will be to submit a formal application with additional details, including the proposed purchase price of the home. At this point, any lender you apply with will also review your credit as part of the process. When you formally apply for a mortgage, the lender will then provide you with a Loan Estimate, which is a standard disclosure document that allows you to review and understand key provisions of the loan. A home mortgage consultant can help you review the Loan Estimate to ensure what you’re being offered fits your needs.
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