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If you’re looking to buy a home in Chicago by obtaining a mortgage, you’ll need to find yourself a good loan officer to help you through the lending process. Buying a home is a big decision and financial commitment, so it’s important to find a loan officer with knowledge and integrity. Here are a few questions to ask when seeking out the right loan officer for you.
What type of loan should I apply for?
A good loan officer will not answer this question without knowing more about you. For a lender to be able to best determine which loan is the best for their client, they need to gather all of the proper information needed to make a recommendation. The potential broker should be able to educate you on the loans you’ll qualify for and describe the pros and cons to each. They should explain the differences between each loan type, such as a fixed rate loan vs. an adjustable rate loan. They will know to tell you that an interest-only loan will come with a balloon payment, or which loans have a prepayment penalty. All of these factors are important in determining the loan that will suit your needs.
Do I need a down payment?
Typically if you’re wanting to qualify for a loan, a lender will require a down payment. Depending on the type of loan program, that down payment can be anywhere from 3% to 20%, so it’s important that your loan officer know what type of down payment you can afford. If you’re unable to put 20% down, your loan options will lessen and you’ll have to pay private mortgage insurance (PMI). The amount you’re able to put down is a determining factor in the types of loans you’ll qualify for. You’ll also want to make sure that this lender can provide you with those loans.
What is your origination fee?
An origination fee, or lender fee, is usually 1-2% of the loan amount, but that isn’t set in stone. You’ll want to ask your lender what their origination fee will be, as well as any additional fees they may charge. Additional fees may include a credit report fee, notary fees, and discount points. Discount points are fees that can be paid to buy the interest rate down, and they also typically run 1% of the loan amount.
Are you able to lock my rate?
Interest rates fluctuate on a daily basis, so having the ability to lock in a good rate is a big selling point for any lender. Some loan officers charge for this service and some don’t, so make sure to ask if there is a fee for a rate lock. You’ll also want to ask how long the lock will last as there is no point in locking a rate for seven days when it will take thirty days for your loan to fund.
Will my loan have a prepayment penalty or a balloon payment?
Chicago still allows prepayment penalty options on loans as long as the borrower has been offered an option without the penalty as well. If you’re opposed to a prepayment penalty, make sure your loan officer is aware. An interest-only loan comes with a balloon payment, which expects the total payment of the principal of your loan to be due at one time. Prior to the balloon payment being due, you pay only the interest. You don’t want either of these coming as a surprise, so it’s best to ask the question up front.
What is the time frame for my loan to be funded?
When you enter into a contract to buy a home, the closing date, which is agreed upon by the buyer and the seller, is very important. If your contract says you’ll close in thirty days, you need to make sure you have a loan officer that can get your loan done in that time frame.
Choosing a good loan officer can greatly reduce the stress of a real estate transaction. Ask as many questions as you need to ensure you’re making the right choice. What are some questions you have about the loan process?