Questions a First-Time Home Buyer Should Ask Their Lender
What are questions a first-time homebuyer should ask their lender?
1. How do I know what type of mortgage is best for me?
2. What kinds of mortgages do you offer?
3. How much should my down payment be?
4. What will my interest rate be?
5. Do you offer a mortgage rate lock?
6. Are there income requirements for buying a home?
7. Do you offer pre-approval or prequalification?
8. What will the costs of closing be?
9. What should I do to prepare my financials when considering buying my first home?
10. Are you doing a hard credit pull on me today?
The current market is definitely a hard one to navigate especially for first-time homebuyers. When purchasing a home for the first time there are so many overwhelming important decisions to make. Here are ten questions to ask your mortgage lender when purchasing a new home.
1. How do I know what type of mortgage is best for me?
There are many options available and finding the right one for you is very important. Your mortgage lender can help you with the process of choosing which mortgage will be best for you. A mortgage lender can help you list the pros and cons of each loan option.
2. What kinds of mortgages do you offer?
There are two major types of mortgages which are conventional loans and government-backed loans. A mortgage lender can help you with choosing the best loan for certain circumstances. They can determine what type of loan you are qualified for.
3. How much should my down payment be?
Usually, a 20% down payment is preferred, especially if you want to avoid PMI (private mortgage insurance). If this is not a figure you can afford, a lender can work with you on the amount you can put down. Depending on what you are approved for, it can be as small as a 3% down payment.
4. What will my interest rate be?
This is usually the first question most people ask a lender. Your interest rate will determine how much you can borrow. There are fixed-rate loans and adjusted rate loans. A 1% difference does not sound like a big difference but it can save you a lot over the lifespan of your loan.
5. Do you offer a mortgage rate lock?
This is important because a rate lock can keep you at a predictable loan cost. This is basically an agreement between you and your lender that the interest rate will not change until closing. If the rates start to rise, this does not matter, you will still get the lower rate.
6. Are there income requirements for buying a home?
There are lending requirements. A lender can help you and they do this case by case with what you will need. It can depend on your credit score and your source of income.
7. Do you offer pre-approval or prequalification?
First, you need to know the differences. Pre-approval means that a lender has verified your income, credit score and assets through documents such as your W-2s, tax returns and bank statements. Prequalification is based on what you tell your lender about your income, assets and credit. Then your loan amount is based on an estimate.
8. What will the costs of closing be?
Closing costs are the fees for processing your loan. These will be paid to the lender. The appraisal fees, origination fees, attorney fees, and title insurance are included in the closing cost. Your lender will provide you with an estimate of closing costs based on the type of loan you go with.
9. What should I do to prepare my financials when considering buying my first home?
There are many things you can do to get your finances in order. Make sure your credit is in good standing. If not, find ways to strengthen your credit. Always determine your budget before you start the process. Do your shopping and compare rates. Always get prequalified before you start looking for a home.
10. Are you doing a hard credit pull on me today?
This is important to ask because a hard credit pull can have an effect on your score. Do not let a lender do a hard credit check until you have agreed to work with that lender.
