September 12, 2018
There are some important questions to ask a prospective lender when you are shopping around for a home loan. Make the most informed choice you can about selecting your lender, and remember that it pays to shop around for an FHA mortgage!
#5: Will You Provide Me With An FHA Loan Estimate?
The Consumer Financial Protection Bureau (CFPB.gov) advises borrowers that lenders are required to provide a loan estimate within three days of application. CFPB says the estimate should include the following:
- estimated interest rate
- monthly payment
- taxes and insurance
- total closing costs for the loan
The estimate should also include how the interest rate and payments may change where applicable. Lenders should be willing to provide this estimate.
#4: Are The Terms Of This FHA Loan Subject To Change?
Ask the lender under what circumstances the terms of the loan may change and why. Some borrowers may wish to apply for an FHA Adjustable Rate Mortgage (FHA ARM) which will feature periodic (regulated) interest rate changes; ask your lender how long the introductory rate will last on the specific type of ARM loan you are interested in.
#3: Will There Be A Balloon Payment On My Mortgage At Payoff Time?
Some borrowers don’t mind anticipating a balloon payment, others may. Knowing how much that payment will be is important for financial planning purposes. It’s always important to read all the fine print on any legally binding agreement such as a mortgage, but it is also good to ask up front about details such as balloon payments.
#2: What Are Your FICO Score Requirements For Maximum Financing?
FHA loan rules specify FICO scores of 580 or higher for the lowest down payment. But your chosen FHA lender may have standards higher than this, which is permitted under FHA mortgage loan rules. Find out if you qualify for the lowest down payment possible with an FHA mortgage, which is 3.5% of the adjusted value of the home.
#1: Do You Offer The Kind Of Home Loan I Need?
This may sound like a very obvious question, but if you seek an FHA condo loan, an FHA mobile home loan, or an FHA One-Time Close Construction loan, you may find that some participating FHA lenders don’t offer one or more of those depending on a variety of factors including demand.
A lender who does not offer a mobile home loan to a potential FHA borrower who wants one can’t really help except to offer alternatives. Those who do offer the right type of loan for your needs can then help you with the other questions about your home loan transaction including refinance loan options later on, where applicable.
Remember that FHA loans can be refinanced into FHA cash-out refinances, no cash-out, and Interest Rate Reduction Refinancing which must offer some kind of tangible benefit to the borrower is most cases. Also, you do not have to use the original participating FHA lender to refinance into another FHA mortgage; all borrowers are free to shop around for a new lender for the refi loan.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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