Before you fill out a mortgage application, ask the lender to put every fee in writing. An application can start a process that costs money and locks you into a timeline. You need to know what you are paying for before you hand over documents or a credit card number. Ask for a full list of fees. If the lender dodges the question or says, “Don’t worry, it’s all standard,” that is your first warning sign. Standard does not mean cheap or the same.
Start by separating lender fees from third-party fees. Lender fees go to the company making the loan. They may include application, origination, underwriting, processing, document preparation, and rate lock fees. Third-party fees cover the appraisal, credit report, title search, title insurance, recording, and transfer taxes. Ask which fees are controlled by the lender and which are set by others. Then ask which lender fees can be negotiated or waived. Many can be reduced, especially if you have strong credit, a large down payment, or competing offers.
Ask for a Loan Estimate. After you apply, the lender must send one within three business days, but you can ask for a sample first. The Loan Estimate shows the interest rate, monthly payment, closing costs, and cash needed to close. Ask how long those numbers are good for. Ask which costs can change and which cannot. Some fees, like the lender’s origination fee, are limited once you get the estimate. Others, like prepaid interest and escrow deposits, can vary. Ask the lender to explain any fee you do not understand. Do not sign until you do.
Ask about points. Discount points are upfront money you pay to lower your interest rate. Origination points are a lender fee for making the loan. Ask how much one point costs, how much it lowers your rate, and how long it takes to break even. If you plan to stay for many years, points might save money. If you might move or refinance soon, they could be a waste. Ask whether the lender offers credits instead. Lender credits lower your upfront costs but usually raise your rate. Get both options in writing and compare.
Ask about the rate lock. A rate lock protects you if rates rise before closing, but it comes with rules. Ask if the rate is locked, how long the lock lasts, and what it costs. Ask when the lock starts: at application, at approval, or at closing. Ask what happens if closing is delayed. Is there an extension fee? Can you float down if rates drop? Does the lock cover both the rate and the points? Get the lock in writing. A verbal promise is not enough.
If you use a mortgage broker, ask who pays them. Brokers can be paid by you, by the lender, or both. Ask if they get more money for steering you to a loan with a higher rate or more fees. Ask for a written broker agreement. Ask if they will show you options from multiple lenders. You want a broker who shops for you, not one who sells one company’s product.
Ask about escrow and monthly costs. Will the lender collect property taxes and homeowners insurance each month? Is there a fee to waive escrow? Ask how much cash you need at closing, including prepaid interest and the first payment date. If your down payment is less than twenty percent, ask about private mortgage insurance. How much is it, how long will you pay it, and how can you remove it? Ask about late fees, grace periods, and prepayment penalties. Ask if you can make extra payments without a penalty. Ask who will service the loan and whether it can be sold. These answers affect your long-term paydown plan.
Finally, ask about the process. How long does closing take? What documents do you need? What could delay things? What happens if the appraisal comes in low? Is a preapproval a real document review or just a prequalification? Does preapproval lock your rate? Usually it does not. Get every important answer in writing. Compare at least three lenders. A good lender welcomes questions. A bad one rushes you. A mortgage lasts for years, so a few hours of questions now can save you thousands later.
