The Mortgage Process
The very first step of the home buying process is to get a pre-approval letter from a lender stating how much you are qualified for. It's important to ask your potential lenders some questions to make sure they are a good fit for you.
Don’t understand something your lender says? Stop and ask for clarification. This is your home buying journey, and you deserve to understand the process every step of the way.
A pre-approval is only valid for 30-90 days, so while you can start talking to lenders, you’ll want to wait on getting that pre-approval letter when you’re ready to buy. Looking for a lender? Here are my recommendations.
Questions to Ask Potential Lenders
1. What type of loan do you recommend for me? Why? There’s no one type of mortgage loan that’s superior to another—but whichever you choose, you need to know why it’s best and how it works.
2. Will my down payment vary based on the loan I choose? If you’re tight on cash or don’t want to be cash poor, let your lender know. Loans vary in their down payment requirements.
3. What is the interest rate and the annual percentage rate (APR)? Everyone talks about the interest rate, but the APR is just as important. It combines the interest rate with the fees a lender charges to originate your loan.
4. Can I lock-in an interest rate? If so, for how long? If you think rates will be moving up, ask if you can lock it in for a set period of time.
5. What will my closing costs be? Are they a part of my loan, or will I pay them in cash at closing? Remember, closing costs usually run 3-6% of your loan value so you need to know how they’ll be covered.
"It is very important not to make any major job changes, major purchases, or open new credit cards or lines of credit, as any of these activities could alter your qualifications for a loan."
Are you a cash, conventional loan, FHA loan, VA loan or USDA loan Buyer?
Conventional loans typically require 20% down with a solid credit score and must be your primary residence to achieve the best interest rates and no PMI (Principal Mortgage Insurance), but don't let this deter you. There are several options for buyers with less than 20% down!
FHA loans require a minimum of 3.5% down, decent credit and for the Seller to agree to certain terms and conditions for you, the Buyer, to receive this loan. A more in-depth look comparing FHA and Conventional Loans.
VA loans are for veterans, there are many details that need to be reviewed by a VA loan officer. Once these are accomplished a minimum of 3% down is required along with a stamp of approval from a licensed VA Loan Appraiser for the home you would like to purchase.
Overall
It is important to have a good credit history by paying your bills on time, limiting your debt, and reducing the amount of credit cards you have and the responsible use of those cards. Loan officers will review your credit report with you to make sure the record of past and current debt is accurate. The better your credit history, the better your credit score and the more mortgage options you will have. The process isn't scary, checkout this simple infographic!
