How to Talk to Mortgage Lenders

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It can be challenging to speak to a mortgage lender if you do not know what points to bring up or questions to ask. You should prepare to speak to mortgage executives at different types of institutions, such as a bank, a lender, and a broker. In a purchase situation, the first meeting should be to interview the representative to see if you trust them and to see what you qualify for. If you are looking to refinance, a first meeting should be to determine what rates are available to you.

Questions to Ask a Mortgage Lender

Research lenders before you start house hunting. State your budget and ask about the details of the loan including the down payment, closing fees, APR, whether it’s fixed-rate or adjustable, and any other fees. Compare multiple offers and don’t sign anything with blank spaces, ballooning rates, or a clause not to sue.

Method 1
Method 1 of 2:

Finding a Lender

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  1. Mortgage paperwork can take a long time to process. You will want to start looking for lenders and rates before you decide on your house or else you might lose out on it. Having a mortgage preapproved will make the entire process smoother and faster. Furthermore, some real estate agents may reject offers from buyers without a mortgage preapproved. [1]
    • Since rate locks attach to a property and not an individual, you cannot lock an interest rate until you have a contract on the property.
  2. Banks, credit unions, and online lenders, and brokers all offer mortgages. Consult different websites to find which ones may be willing to offer you a better deal. While you can visit banks and credit unions in person, you may have to call an online company.
    • Be careful with online lenders. While you may find a reputable one that offers a good deal, you are also likely to encounter more scams. [2]
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  3. The best way to get a good deal on your mortgage is to talk to several lenders. You can get a feel for their different personalities and your comfort level with each of them. This will let you compare rates, fees, and contracts. [3]
  4. You may not know yet what kind of mortgage you need, but you can familiarize yourself with the terms and types of mortgages that your lender may talk to you about. These terms include:
    • Interest rate: the cost you pay to borrow the loan. The interest rate is a percentage of the loan. You pay this on top of the money you owe to repay the loan.
    • Annual Percentage Rate (APR): how much you will pay every year year for the loan. This includes fees and interest. [4]
    • Adjustable Rate Mortgage (ARM): a mortgage with interest rates that change over time. Rates may start low and then increase. This may be fine if you are planning to sell the house after a few years.
    • Fixed Rate Mortgage: a mortgage with interest rates that do not change over time. This is ideal if you want to stay in the same house for the full length of the mortgage.
    • Hybrid Adjustable Rate Mortgage: a mortgage that has fixed fees for the first year or two. After this point, the rates may change.
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Method 2
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Discussing Your Options

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  1. When you first meet with a lender, you will want to inform them of what you think your budget is. Tell them roughly what price range of house you are looking for. They will take this into consideration after you’ve made an application.
    • Say something along the lines of: “Right now, I am looking at houses in the $250,000 range, but I want to make sure that I qualify to borrow that much money first.”
    • Listen carefully to what they say. Ask questions about anything you are uncertain about or don’t know.
  2. You want to make sure that there are no hidden fees or rules in your contract, and you want to understand fully what the mortgage process will be like. You can ask:
    • "How much will the down payment be? How much are closing costs?"
    • "What is the APR? How much will I be paying every year, including fees, penalties, and interest?"
    • “How long does it take to process a mortgage?”
    • “Do you offer fixed-rate or adjustable rate mortgages?”
    • “What will happen if I fall behind on my payments?”
    • “Are there prepayment penalties?” In other words: “Will I be charged fees if I pay off my mortgage early?”
    • “What documents and information do I need to provide you?” [5]
  3. There are many other fees that are tacked onto mortgages. While the bulk of your conversation will be about the interest rate and payment plan, be sure to ask your lender about what other charges they will incur. Ask directly: “In addition to my interest rate and monthly payment, what other fees am I responsible for?” Ask them to break down these fees and their purpose. These include:
    • Origination fees: these are the fees your lender will charge you for creating the loan.
    • Discount points: these are the difference in yield between your chosen rate and the par rate.
    • Closing costs: these are the fees you pay when the deed transfers to you. [6]
    • Note that this is the only stage of the process where the lender can legally negotiate with you. If you are haggling over actual rates, which are set 60 days in advance, you may be dealing with someone unsavory.
  4. Once they give you a rate, know that without locking the rate in, it can change at any time. You need a property to lock in the rate. Accepting this fluidity, inform them that you want to compare deals with other lenders and that you will get back to them shortly.
    • You can say, “I have a few more meetings set up with other banks, but I will let you know as soon as possible what my decision is.”
    • If the lender tries to pressure you into signing a loan right away, resist. They are using predatory tactics to coerce you into getting a bad loan. [7] Simply state: “I do not feel comfortable signing onto a loan before I have explored my options.” If the lender pushes you, stand your ground. Say: “I am not going to sign this loan yet. While I appreciate the deal, I do not like being pressured into a loan.”
  5. You want to be absolutely aware of common scam tactics. Read all documents carefully, and go over the fine print. Ask a lawyer to help you. Some common predatory tactics include:
    • Blank spaces in documents. You should say: “I do not feel comfortable signing papers that have blank spots in them. Please fill in these spots, and resubmit the contract to me.”
    • Offering extremely low interest rates at the beginning and increasing them substantially after a certain point. This is known as ballooning. You should say: “I would rather pay slightly higher fees throughout the mortgage at a fixed rate. Can we negotiate this?”
    • A statement in the contract that prohibits you from suing them in the future. Say: “I do not feel comfortable with this clause. I will not waive my right to sue.”
    • If the lender will not budge on these points, walk away. They are not a reputable lender. [8]
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Expert Q&A

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  • Question
    Is it true that the higher your credit score, the more likely you will be able to negotiate?
    Ryan Baril
    VP, CAPITALPlus Mortgage
    Ryan Baril is the Vice President of CAPITALPlus Mortgage, a boutique mortgage origination and underwriting company founded in 2001. Ryan has been educating consumers about the mortgage process and general finance for almost 20 years. He graduated from the University of Central Florida in 2012 with a B.S.B.A. in Marketing.
    Ryan Baril
    VP, CAPITALPlus Mortgage
    Expert Answer
    Not exactly. Higher credit scores make different products and rate tiers available, but rates are set 60 days in advance. If a lender tries to negotiate anything other than fees with you, that is illegal. The rates have already been set.
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      Warnings

      • If a deal seems too good to be true, it usually always is.
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      • Remember that your financial situation can change in the coming years. Even if you are confident you can pay a high interest rate now, acknowledge that things can change.
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      References

      1. ↑ https://www.bankrate.com/finance/mortgages/do-you-need-mortgage-preapproval.aspx
      2. ↑ https://smartasset.com/mortgage/pros-and-cons-of-getting-a-mortgage-online
      3. ↑ https://portal.hud.gov/hudportal/documents/huddoc?id=booklet.pdf
      4. ↑ https://www.consumerfinance.gov/askcfpb/135/what-is-the-difference-between-a-mortgage-interest-rate-and-an-apr.html
      5. ↑ https://www.realtor.com/advice/finance/10-questions-ask-mortgage-lender/
      6. ↑ https://www.bankrate.com/finance/mortgages/10-questions-for-lenders-1.aspx
      7. ↑ https://www.debt.org/credit/predatory-lending/
      8. ↑ https://www.debt.org/credit/predatory-lending/

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