Five Questions to Ask a Lender Before You Sign Anything

Meta description: Most buyers compare rates and nothing else. Here are the questions that actually separate one lender from another, and what a bad answer sounds like.

Most people shop lenders by calling three of them and asking for a rate.

The problem is that a rate quoted over the phone is not a commitment, it isn't necessarily comparable to the next one, and it can be quietly buying itself down with points you weren't told about. You end up choosing between three numbers that don't mean the same thing.

Here's what to ask instead, and more usefully, what a good answer sounds like.

1. "Can you send me a Loan Estimate?"

Not a quote. Not a fee worksheet. A Loan Estimate, which is a specific federal form with a specific layout, and once a lender issues one they're held to parts of it.

Section A on page 2 is origination charges: points, origination fee, underwriting, processing. That's the section to compare across lenders, because it's the part they control and the part they can't change later without a documented reason. Sections B and C are third-party costs like title and escrow, which will look similar everywhere.

Then ask the follow-up: "What's the rate with zero points?" A rate that beats everyone else's by half a percent is often carrying two points of buy-down, which is $12,000 on a $600,000 loan. That's not a better deal, it's a prepayment. Comparing rates without normalizing for points is the most common mistake people make.

Worrying answer: any version of "I can't send that yet" without an explanation, or a PDF that says "estimate" at the top but isn't the standard form.

2. "Is there a prepayment penalty, and exactly how is it structured?"

If you're buying an owner-occupied home with a conventional loan, this is mostly a non-issue. Prepayment penalties on primary residences were largely legislated out after 2010.

On investment loans, particularly DSCR and non-QM, they're common, and this is the question that costs investors the most money. Ask for the structure specifically. A five-year step-down and a three-year step-down are very different products. Then ask two things that often get skipped: does it apply to a sale, or only a refinance? And is there a version of this loan without the penalty, and what does that cost in rate?

If you're running a BRRRR, this is the single most consequential term in your file. A three-year prepay on a property you plan to refinance in eight months isn't a detail, it's a broken strategy.

Worrying answer: "There might be one, I'd have to check." They should know their own products.

3. "Are you a broker, a banker, or a bank?"

This determines what "this is your best option" actually means.

A retail bank sells its own products. If your situation doesn't fit them, the answer is no, and you'll never hear about the product that would have worked. A broker submits to many lenders and can shop your file, though the process then runs through someone else's underwriting. A correspondent lender underwrites and funds in house and then sells the loan, which usually means faster decisions and a narrower shelf than a broker.

None of these is automatically better. But you should know which one you're talking to, because it tells you whether their recommendation is the best option available or the best option they carry.

Worth asking alongside it: "Which of these do you actually do regularly?" Plenty of lenders will tell you they do DSCR. Fewer have closed one this quarter.

4. "How do locks work here?"

A quote is not a lock. Ask when you can lock, how long the lock runs, what it costs, and specifically what an extension costs per day if escrow drags. Extension fees are usually quoted in basis points and they add up quickly on a 45-day close that turns into 60.

Also ask whether they offer a float-down if rates drop before you close, and what triggers it. Some do, most attach conditions.

Worrying answer: vagueness about extension costs. That's the fee people get surprised by, and a lender who won't quote it upfront is telling you something.

5. "Who touches my file, and when do you order the appraisal?"

The appraisal is where deals die. Ask when they order it, because a lender who waits until your inspection contingency clears has just moved your biggest unknown to the point where your earnest money is already exposed. Ask what appraisal turn times look like in your county right now, not nationally.

Then ask who you'll be speaking to after you're in contract. At a lot of call-center operations the loan officer disappears once the file moves to processing, and the listing agent calling to check on your loan gets voicemail. In a competitive offer, whether your lender picks up the phone is part of what you're buying.

Worth asking for: the loan officer's actual cell number. The ones who intend to be reachable will give it to you.

The questions change depending on what you're doing

If you're house hacking, ask about the occupancy requirement. Owner occupied financing generally requires you to move in within 60 days and stay for at least twelve months. That's a real obligation, and if your plan involves moving out sooner, say so out loud before you sign rather than discovering the clause later.

If you're running a BRRRR, ask about seasoning on the cash-out refinance. Conventional financing typically requires six months of ownership before you can use the new appraised value rather than your purchase price, though the delayed financing exception can shorten that if you bought with cash. DSCR lenders vary. This determines whether your capital comes back out in month four or month eight, which determines how many deals you get done this year.

If you're buying and holding, ask which of your conventional financed-property slots this deal should use, if any. Conventional is the cheapest money you'll get on a rental, so it's worth spending those slots on your largest loan balances rather than burning them on whatever you happen to buy first.

One honest caveat

You can overdo this. If you interrogate a good loan officer for an hour before you have a property or a preapproval, you're spending goodwill you'll want later. Ask questions one, two and three early, when you're choosing who to work with. Four and five matter most once you're actually shopping.

Talk to us

We work conventional, DSCR, bank statement and non-QM, which means when we tell you a product is the right fit it isn't because it's the only one on the shelf.

Call 800-913-2169 and ask us the five questions above. If you want to know who you'd be working with first, you can meet the loan officer team or read what past clients have said.