5 Questions to Ask Before Choosing a Mortgage

Choosing a mortgage is about more than finding an interest rate. Asking the right questions can help you better understand your options, compare the costs, and choose financing that fits your goals.

By Sandy Biondo | Consolidated Lenders Group

Buying a home comes with a lot of decisions.

Where do you want to live? How much are you comfortable spending? What type of home are you looking for?

Then comes another important decision:

Which mortgage makes sense for you?

Mortgage options can vary in their interest rates, monthly payments, down-payment requirements, mortgage insurance, closing costs and loan terms.

You don't need to become a mortgage expert before buying a home. But knowing what to ask can make the process much easier to understand.

Here are five questions worth asking before choosing a mortgage.

1. What Will My Total Monthly Payment Be?

The principal-and-interest payment is important—but it may not represent your entire monthly housing expense.

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Depending on your property and financing, your monthly housing costs may include:

Principal + Interest + Property Taxes + Homeowners Insurance + Mortgage Insurance (if applicable) + HOA dues (if applicable)

Ask for an estimate of the complete monthly payment so you have a better idea of how the home may fit into your budget.

And remember: qualifying for a particular loan amount doesn't necessarily mean that's the amount you'll personally feel comfortable spending each month.

2. How Much Money Will I Need Upfront?

Your down payment is only one part of the money you may need when purchasing a home.

There may also be:

• Closing costs

• Prepaid taxes or insurance

• Initial escrow funding, when applicable

• Inspection and other transaction-related expenses

• Moving expenses

• Repairs or improvements after closing

Ask for an estimate of your cash to close and make sure you understand what's included.

It's also worth considering how much savings you'd like to have remaining after the purchase.

Getting the keys shouldn't necessarily mean emptying your savings account.

3. What Is the Interest Rate—and What Does It Cost to Get That Rate?

This is an important distinction.

Two mortgage offers might advertise different rates, but the lower rate could require the borrower to pay additional money upfront through discount points.

Another option might offer lender credits toward closing costs in exchange for a higher interest rate.

So instead of asking only:

“What's my rate?”

also ask:

“Are there points or lender credits associated with this rate?”

Understanding both the interest rate and the cost associated with obtaining it can help you make a more meaningful comparison.

4. Does This Loan Include Mortgage Insurance?

Depending on your down payment and loan program, mortgage insurance may be required.

If it is, ask:

How much will it cost?

Is it paid monthly, upfront, or both?

How long might I be required to pay it?

The rules vary by mortgage type, so understanding how mortgage insurance works with the specific financing you're considering is important.

Mortgage insurance isn't necessarily a reason to reject a loan. For some buyers, a lower-down-payment option that includes mortgage insurance may allow them to purchase without waiting years to accumulate a larger down payment.

The important part is knowing the cost and understanding how it affects the overall loan.

5. What Will This Mortgage Cost Me Over Time?

It's easy to focus on what happens at closing.

But your mortgage could be with you for many years.

Ask about:

Loan term • Interest rate • Monthly payment • Upfront costs • Mortgage insurance • Whether the rate is fixed or adjustable

If you're comparing multiple loan options, also think about how long you expect to own the home or keep the mortgage.

For example, paying additional money upfront to obtain a lower interest rate could potentially be more valuable to someone who expects to keep the mortgage for many years than to someone who expects to sell relatively soon.

The goal is to understand both:

“What does this cost me today?”

and

“What could this cost me over time?”

One More Question: What Don't I Understand Yet?

This might be the most valuable question of all.

Mortgage documents contain a lot of unfamiliar terminology. If you don't understand something, ask.

Ask about the:

APR • Loan Estimate • Escrow • Rate lock • Points • Lender credits • Prepayment penalties, if any • Closing costs

There is no reason to feel uncomfortable asking for an explanation.

You should understand the mortgage you're agreeing to—not simply sign the paperwork because the numbers look acceptable.

The Right Questions Can Make a Big Difference

Have Questions? That's What Sandy Is Here For.

You don't need to walk into a mortgage conversation knowing all the answers.

Bring your questions.

Sandy can help you understand available financing options, explain unfamiliar terms, and walk through the numbers with you so you can make a more informed decision about your next step.

Good questions can lead to better-informed decisions—and Sandy welcomes them.

Every borrower's situation is different. Loan programs, rates, terms, eligibility requirements, mortgage insurance requirements and costs vary. This information is provided for general educational purposes and is not a commitment to lend.