14 questions to ask a mortgage lender

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If you’re a first-time home buyer, you might be wondering what questions to ask a mortgage lender. This list helps buyers compare lenders – not just gather information.

Knowing which mortgage loan questions to ask early can prevent surprises later. Be sure to take notes and request written estimates when possible so you can rest easy knowing you’re prepared for the road ahead.

Key takeaways:

• Compare lenders: Asking targeted questions helps you evaluate your options rather than just collecting facts.
• Understand your costs: Clarifying loan estimates, closing disclosures, and cash to close ensures you know exactly what your mortgage will cost.
• Be prepared: Having your financial documents ready and knowing what questions to ask can speed up the preapproval process.

1. How much will my mortgage cost?

The total cost of the mortgage includes not only the monthly payment, but also cash to close, which includes your down payment and other closing costs. You should also consider the total interest paid over time. Here is a mortgage payment breakdown to expect:

• Principal and interest: This covers the loan balance and the cost of borrowing the money.
• Property taxes: Property taxes cover local services that might include public schools, parks and recreation, emergency services, and garbage collection.
• Homeowners insurance: This protects your property and belongings against damage and theft.
• Mortgage insurance (if applicable): If you have a smaller down payment, you may need this to protect the lender if you default.

While this isn’t included in the mortgage payment, those living in a homeowners association will also have to budget for HOA dues.

Compare the same home price, down payment, loan term, and mortgage option across lenders to get an apples-to-apples comparison. You can also use a mortgage calculator to run your own numbers.

Getting a breakdown of the payment and running your own numbers can help you understand what to expect going into the process, so you don’t get surprised.

2. Which mortgage terms are right for me?

The right loan depends on how long you plan to keep the home and how comfortable you are with payment changes. Ask your mortgage lender about the following types of loans:

Conventional fixed-rate mortgages

A 30-year conventional fixed-rate loan is the most common type of mortgage. Since the term is so long, monthly payments are lower, and the fact that rates are fixed means that your interest rate will remain the same throughout the life of the loan. However, the longer the term of your mortgage the more interest you’ll pay on the loan. So, if you can afford higher monthly payments, it may be worth choosing a 15- or 20-year term.

Your payments could still change based on increases or decreases in property taxes or homeowners insurance. Ask how your payment would compare given a shorter or longer term, using real numbers.

Adjustable-rate mortgages (ARMs)

Unlike fixed-rate mortgages, the interest rates of ARMs change over the life of the loan. If you choose an adjustable-rate mortgage, your interest rate will increase or decrease as the market fluctuates after the fixed period expires.

This means that your mortgage payments will adjust from time to time, which can make budgeting a challenge. The good news is that there are caps, which limit the extent your interest rate and monthly payment can increase periodically and over the life of the loan. However, the same limits are placed on downward movement.

Ask the following questions:

• What index is used to determine the adjustment?
• What’s the lender margin?
• What are the interest rate caps or floors?
• What’s the highest the payment can be at the lifetime rate cap?
• How far in advance of each adjustment will you find out what the new rate will be?

FHA loans

Borrowers who have lower credit scores, incomes, and savings are more likely to qualify for Federal Housing Administration mortgages. FHA loans have lower credit score minimums and down payment requirements than most conventional loans.¹

Compared to conventional loans, loans from the FHA have tighter restrictions such as how much you can borrow, and mortgage insurance may be required. Ask for the full cost of mortgage insurance over time, not just the minimum down payment.

VA loans

VA loans are backed by the U.S. Department of Veterans Affairs (VA) for veterans, military personnel, and eligible surviving spouses.² VA loans tend to have lower interest rates and don’t require down payments. However, there are some restrictions and fees involved. Those eligible should expect to pay funding fees and have reserve funds available.

If eligible, ask how the funding fee affects your total loan amount and cash to close.

3. What are your credit requirements?

A credit score is a three-digit number that indicates to lenders how likely you are to pay back the money you borrow. The higher your credit score, the easier it is to get a mortgage loan. However, you can find ways to buy a home if you have bad credit – you may have to pay more for your loan.

Each lender sets its own standards for what they consider an acceptable credit score. You must ask your mortgage lender about credit qualifications early in the process. If you have a good credit score, you can ask your lender if you qualify for any special offers or lower interest rates.

4. Do you offer mortgage points?

Mortgage points, sometimes called discount points, are an optional fee that you can pay at closing to reduce your interest rate and save on the overall cost of the loan. The cost of each mortgage point is equal to 1% of your total loan.

Be sure to ask your lender how to calculate your breakeven point when it makes sense to buy mortgage points, how much each point will lower your interest rate, and what the maximum number of points you can buy is.

For example, if you take out a $150,000 loan, you may have the option to buy mortgage points for $1,500 each at closing.³ Mortgage points are beneficial for home buyers who plan on living in their home for a long time because they can save tens of thousands of dollars over their loan term.

5. Do I need an escrow account?

An escrow account holds money for prepaid property taxes and insurance premiums and can be opened at any time, but most people start one during closing. Escrow accounts are often required for government-backed loans and optional for conventional loans.

Ask your lender if you need an escrow account. If you’re required to have one, ask what options you have for paying for shortages and whether you can get a refund if you overpay. Make sure you also find out how much money you’ll need to hold in escrow.

6. What is the interest rate and APR?

Your interest rate directly determines your monthly payment. However, you should ask your mortgage lender about the annual percentage rate (APR) because it provides insight into the full cost of borrowing money.

The APR includes the interest rate along with certain lender fees, providing a broader cost comparison. Buyers should ask which fees are included in the APR and which aren’t.

8. Is it possible to buy a house without my spouse?

Buying a home without your spouse is possible, but it’s not as easy as leaving your partner off the loan application. If you live in a state with a community property statute, you must share ownership of any assets you gain during your marriage with your spouse.

Ask your lender if it’s possible to buy a home without your spouse; your lender should know whether you live in a community property state or a common-law state. If you live in a common-law state, you can leave your partner’s finances off the paperwork when you buy a home.

If you do live in a community property state, you can expect your spouse to have to sign certain documents regardless of whether they’re on the mortgage. Depending on the loan option, their debt-to-income ratio (DTI) may be taken into account as well.

8. Is it possible to buy a house without my spouse?

Buying a home without your spouse is possible, but it’s not as easy as leaving your partner off the loan application. If you live in a state with a community property statute, you must share ownership of any assets you gain during your marriage with your spouse.

Ask your lender if it’s possible to buy a home without your spouse; your lender should know whether you live in a community property state or a common-law state. If you live in a common-law state, you can leave your partner’s finances off the paperwork when you buy a home. However, certain types of government loans require your lender to consider your partner’s debt and income when you apply for a loan, even in common-law states.

9. Which types of mortgages do you offer?

Not every lender is legally qualified to offer both conventional and government-backed loans, so ask your mortgage lender which types of loans they offer. They should be able to explain the different requirements for each government-backed loan.

10. Are there income requirements for buying a house?

There is no set dollar amount of income you need to have to buy a home. However, your income does play a significant role in how much home you can afford. Lenders look at your sources of income when they consider you for a loan, including commissions, military benefits, child support, and more.

Certain programs that are targeted at low-income home buyers do have income limits. The limit is often 80% of the area median where you’re looking to buy but may vary.

Ask your lender how much income you need to buy a home and which streams of income they consider when they calculate your total earning power. Finally, ask what documents you need to give them to prove your income, such as W-2s, pay stubs, bank account information, and other materials.

11. Do you offer preapproval or prequalification?

Preapproval and prequalification are two processes that are often confused with each other. Let’s break each down:

• Prequalification: During a prequalification, a lender asks you questions about your income, credit score, and assets to give you an estimate of how large of a loan you can get. However, they don’t verify any of this information, which means that the number you get during prequalification can easily change if you report incorrect information.
• Preapproval: During a preapproval, your lender verifies your income, assets, and credit information by requesting official documents, including your W-2s, bank statements, and tax returns. This allows your lender to give you an accurate mortgage loan figure. Rocket Mortgage refers to a preapproval as a Verified Approval to avoid terminology confusion.⁴

Ask your lender how long your preapproval letter is good for. We recommend clients who are ready to make an offer get preapproved because sellers and their real estate agents will take your bid more seriously if they know you’ve lined up your financing.

12. What’s the down payment needed to buy a house?

Check with your lender to find out about how much of a down payment you need to have at closing. Ask about government-backed loans and whether you qualify for a 0% down loan. FHA loans start at 3.5% down. Conventional loan down payments are 3% – 5% for a primary residence depending on income and first-time home buyer status.⁵

The often-quoted 20% figure is about avoiding private mortgage insurance, which protects your lender if you default. In general, it can be canceled by request once you reach 20% equity in your home based on the original amortization schedule. Ask your lender about other circumstances for mortgage insurance removal.

13. What will closing costs be?

Closing costs are processing fees you pay to your lender to close out your loan. Some typical closing costs include appraisal fees, origination fees, attorney fees, and title insurance. The specific closing costs you’ll pay depend on where you live and your loan type. Closing costs will usually run 3% – 6% of the loan amount or purchase price.

Ask your lender about the average closing costs in your state. Also, ask what fees and inspections are required by law, which are optional, and which services you can choose for yourself.

The Loan Estimate and Closing Disclosure will list itemized costs, making it easy to compare lender fees and third-party fees.

14. Is there a prepayment penalty?

You may find yourself in a position to pay off your mortgage early. If you can swing it, this can save you thousands of dollars in interest. However, not all mortgage lenders allow clients to do so. If they do allow you to pay off your loan faster, you should ask whether there are any prepayment penalties.

Mortgage lenders charge these fees to dissuade borrowers from making extra payments on their loans, refinancing their loans at a lower rate, or selling their home before the loan is due.⁶

Prepayment penalties enable mortgage lenders to recoup some of the money that they would have made off your loan had you continued to make monthly payments through the end of your loan term. There are different types of prepayment penalties: soft and hard.

• Soft prepayment penalty: Borrowers can sell their homes without being penalized but are charged if they refinance or pay off the mortgage in one lump sum.
• Hard prepayment penalty: Borrowers are required to pay fees regardless of whether they sell their home, refinance it, or make a large payment to pay it off.

If your mortgage lender charges prepayment penalties, ask how much they cost. How prepayment penalties are charged varies among lenders. They can be very expensive and can make early payoffs costly.

A note about mortgage brokers

A mortgage lender works for a bank or financial institution to determine the qualification of borrowers and provide them with funds. However, a mortgage broker works with borrowers to help them shop around and find the appropriate lender for their circumstances.

Instead of researching different types of loans and lenders independently, mortgage brokers do the work for you. After they find the right loan and lender for your financial situation, they help you gather the information you need to fill out your mortgage application. As a result of the services brokers provide, you pay them a commission, which is a percentage of your ultimate mortgage amount.

Before choosing to work with a mortgage broker, you should understand how they operate. Some mortgage brokers primarily work with specific financial institutions and promote lenders with whom they have long-standing relationships.

Given the differences in their roles, the questions you would ask a mortgage broker are different from those you’d ask a lender. Here are some important questions to ask a mortgage broker:

• Why should I work with you instead of going to a lender directly?
• How will you negotiate on my behalf to ensure I get better terms for my mortgage?
• How will you find me the right loan type and lender for my circumstances?
• How much do you charge for your services?
• Are there any specific lenders you work with frequently?
• Would you feel comfortable recommending a lender you don’t typically work with?
• How long will it take to find a lender?

How do I prepare before meeting with a mortgage lender?

Although it may be easy to find a lender, you should get one when you’re ready and prepared. Here are a few things to bring and prepare before a meeting:

• Recent pay stubs
• W-2s or tax returns
• Recent bank statements
• Estimated down payment source
• Monthly debt list (this helps calculate your debt-to-income ratio)
• Target price range

Having these documents ready in advance will speed up your process because the underwriter won’t have to ask you for them later.

The bottom line: Prepare questions before choosing a mortgage lender

Asking your lender a handful of questions ahead of time can help make purchasing a home easier and less stressful for you. Make sure you ask your mortgage lender – or broker – plenty of questions about income requirements, the types of loans you qualify for, and how much you have to save for a down payment and closing costs.

Do you have questions or need help finding the right loan for you? Apply online and take the opportunity to connect with one of our Home Loan Experts.

¹ Rocket Mortgage is not acting on behalf of FHA or HUD.

² Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

³ Any figures, interest rates, loan examples, and market data referenced in this article are hypothetical or aggregated for educational purposes only. They are not intended to reflect current pricing, available terms, or personalized loan options for any consumer. This content does not constitute an advertisement of credit terms, a solicitation or offer to extend credit, or a rate quote under federal or state lending laws. Actual mortgage rates and terms are determined by individual financial qualifications, property characteristics, market conditions, and other factors, and are subject to change without notice.

If you are seeking current, real-time mortgage rate information please refer to the official live rate information and product details published at RocketMortgage.com/mortgage-rates, where current pricing and various loan terms are made available.

⁴ Participation in the Verified Approval program is based on an underwriter’s comprehensive analysis of your credit, income, employment status, assets and debt. If new information materially changes the underwriting decision resulting in a denial of your credit request, if the loan fails to close for a reason outside of Rocket Mortgage’s control, including, but not limited to satisfactory insurance, appraisal and title report/search, or if you no longer want to proceed with the loan, your participation in the program will be discontinued. If your eligibility in the program does not change and your mortgage loan does not close due to a Rocket Mortgage error, you will receive the $1,000. This offer does not apply to new purchase loans submitted to Rocket Mortgage through a mortgage broker. Rocket Mortgage reserves the right to cancel this offer at any time. Acceptance of this offer constitutes the acceptance of these terms and conditions, which are subject to change at the sole discretion of Rocket Mortgage. Additional conditions or exclusions may apply.

⁵ The 3% down payment option is only available on certain conventional loan products and is not available in all states. Additional terms and conditions may apply.

⁶ Refinancing may increase finance charges over the life of the loan.

Rocket Mortgage is a trademark of Rocket Mortgage LLC or its affiliates.