10 Mortgage Questions a First-Time Home Buyer May Be Embarrassed to Ask
First-time home buyers have a lot of questions about mortgages. The problem is compounded by the embarrassment of interrupting a would-be lender or mortgage broker in the middle of a conversation.
No, not everyone knows the questions that should be asked. You should ask these questions. Research and study a bit, so you know the basics. Here is a short guide to the most common mortgage questions and answers you need to know.
- How much can I borrow to purchase a home in Sydney?
Lenders may consider your debt-to-income ratio, employment status, and credit history when determining how much you might qualify for. You should talk to a lender about getting pre-qualified for a home loan before you start searching. The whole experience can be made better if you do this.
Special government-sponsored mortgage programs may be available to veterans and first home buyers. Your lender can tell you what you might qualify for.
- How does a mortgage pre-qualification differ from a mortgage pre-approval?
A pre-approval holds more weight than a pre-qualification. You can get someone to print out a pre-qualification letter for you online. You’ll discover that if an agent is looking at a pre-qualification letter when you’re negotiating, it probably isn’t worth much to them. Pre-qualification is not an approval or commitment to lend; you must submit additional information for review.
A pre-approval letter takes more time and effort to prepare because lenders verify your finances in an independently verifiable way. For that reason, it carries more weight. If you’re serious about buying a home, ensure to get yourself pre-approved.
- How much money do I have to pay down?
Put down 20% of the purchase price if you want the best rate and terms on your loan. Although higher down payment isn’t necessary, a lower down payment can result in a PMI premium if you’re under 20 percent.
The down payment you put will also have an impact on other variables such as interest rates, terms, and monthly payments. Ask your lender for more information regarding the minimum down payment required for your loan and any cost-saving assistance programs you might be eligible for, and then decide what’s right for you.
- What kind of assistance is available to help with the down payment?
If you need help with down payment, experts say your parents may be able to help — provided their finances are in order. Gifted money can also be helpful. Even so, you must absolutely inform your lender that the money was a gift otherwise faking on this front would raise red flags.
If private assistance isn’t a possibility, or isn’t enough, there are over 2,000 down payment assistance programs in Australia that can help,as long as you meet the eligibility requirements for both income and credit.
Find out if there are any programs in your area to help you become a homeowner through your real estate agent or lender.
- What’s the rate of interest?
You should start off by requesting a direct interest rate quote from the lender, along with a corresponding annual percentage rate (APR) for the loan. Due to the APR’s accounting for fees and other loan-related charges, it provides a direct comparison of lenders. Do your research and don’t hesitate to shop around until you find a lender you like.
- How many points does the rate include?
Points are fees paid to the lender at closing in exchange for a reduced interest rate. Usually, 1 point = 1% of your total mortgage amount. Ask your lender to find out how many points are included in the loan and whether purchasing more or fewer points is beneficial.
- When can I lock in the interest rate?
Interest rates fluctuate constantly. A low interest rate can sometimes be worth locking in. You can ask your lender when you can lock in a particular rate, and how long you can lock it in. Be aware that lenders normally offer shorter-term locks at lower rates and longer-term ones at higher rates.
- How much will my closing costs be?
Don’t forget to account for closing costs when buying a home. Closing costs include loan origination fees, appraisal charges, and attorney’s fees (if any). You should be provided with a Loan Estimate form from your lender to figure out roughly how much your loan will cost.
- Are there any other charges or fees I need to know about?
The more information you can gather beforehand, the better prepared you’ll be for any unexpected expenses you might encounter on the way. To help you understand the different fees associated with your loan, your lender should give you a Closing Disclosure. Before stepping ahead, you should compare the Closing Disclosure with the Loan Estimate.
- Can you estimate the closing date?
Several factors, many of them completely out of your control, determine your exact closing date. Enquire your lender about when you can expect the loan to be closed. By doing this, you’ll at least have an idea of how long it will take to complete it.
There are many factors that would cause your closing to be delayed. As buying a home is a complicated process with many requirements and stages, delays are normal. However, you can avoid them by staying in touch with your lender and providing the most up-to-date documentation as soon as you can.
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