Got Questions About Your First Mortgage? Of Course You Do!
Buying your first home is one of life’s most rewarding experiences. That is, when everything goes right. But unfortunately, a lot of first-time buyers wind up suffering from buyer’s regret because they were caught by surprise by things like closing costs and other fees, or they purchased a home that they can’t realistically afford, or they just had misconceptions about the home buying process.
The good thing is that by simply asking your lender the right questions, you can avoid a lot of the pitfalls that can negatively affect your experience. Here are five important mortgage questions you need to be asking your lender.
#1: How Much Home Can I Really Afford?
This is one of the most important questions first-time home buyers should be asking lenders. The reason is because what you can get approved for isn’t always what you can afford. Just because you can get a loan approval for $400,000 doesn’t mean that you can afford the mortgage payment that comes with it.
Asking this question will allow the lender to review your income and expenses, so they can give you a better idea of how much of a monthly payment you can reasonably afford and thus, how much home you can comfortably afford. Once you know this, you can narrow your search to houses that fit that number. After all, the last thing you want to have happen is for you to struggle financially once you get into your new home.
#2: How Much Money Do I Need for a Down Payment?
Coming up with a large down payment is always recommended because it helps you qualify for a lower interest rate and reduces your monthly payment obligation. Putting at least 20 percent down will also help you avoid having to pay private mortgage insurance (PMI) every month.
But if you can’t scrape together a 20 percent down payment, all is not lost. Your lender may be able to get you approved for a loan that doesn’t require as much down. Or, if you are in the military or a veteran, you can even get a loan with no money down. Of course, there are pros and cons to all these options, so talking about your down payment with your lender is a must before you get too far into the application process.
#3: How Much are Closing Costs?
Closing costs include a variety of different fees, such as title insurance fees, survey costs, appraisal fees, attorney fees, real estate commissions, and more. These expenses are paid at closing, and they can add up, so it is not uncommon for some buyers to be caught by surprise by how much their closing costs are.
To help you avoid this unpleasant surprise on a day when you should be excited, you should discuss your closing costs with your lender. While it is almost impossible to guess the exact amount prior to closing, your lender should be able to give you a close estimate.
#4: Can I Get Approved for a Mortgage with My Credit?
We live in a time where very few Americans have perfect credit, especially after so many families suffered financially during the Covid-19 pandemic. So, if you have a less-than-perfect credit score you may be worried that you won’t get approved for your loan. The good thing is that while good credit certainly makes getting approved easier, it is not the only thing lenders use to make their approval decisions.
In some cases, it can be possible for someone with a credit score of 520 to get approved for a loan if their circumstances for the slip in their score can be explained. Lenders also take other factors into consideration when deciding on an approval, such as your debt, income, and size of your down payment.
#5: Is Now a Good Time to Buy a Home?
Interest rates are rising, so you may be thinking that now might not be the best time to buy your first home. The truth is interest rates are still low when you take a historical look at them. But every week that passes changes the real estate landscape a little. Therefore, it is important to ask your lender this question. Your lender will help you make the best decision for your unique situation.
Your Goal of Home Ownership Starts by Choosing a Lender You Can Trust
Your mortgage lender is one of the most important members of your home buying team. They will be valuable sources of information and advice and as a result, they can play an impactful role in how your buying experience winds up being.
So, do your due diligence and compare lenders before settling on one. Asking the above five questions will help you gauge their honesty and integrity by the answers they provide. Most importantly, their answers will tell you if they are just looking to make a sale or if they are really invested in helping you get the best home for your situation.
