Knowing the answers to these TOP 10 Questions can help make the Mortgage process a lot less stressful and can also save you THOUSANDS of Dollars in closing costs.
If you're like the average person buying a home you will need to obtain a mortgage, and the stress that this process can put on you can be overwhelming. However, if you can educate yourself on what the process is and what you should expect, you can make this part of your buying experience much less overwhelming and a lot more pleasant.
Do I Even Qualify?
The fear of being rejected is one of the biggest issues that many First Time Home Buyers face. However, unless you have the cash to pay for a home the mortgage process is inevitable. There are many programs available today to provide the financing but you need to know where to look. The best example of this is the OVERLAYS that exist in the lending environment. The best example of this I can make is in relation to FHA loans. You can qualify for an FHA loan with as little as 3.5% down with a minimum score of only 580. However, you may have a 590 credit score and be denied by your lender because you do not have a 600 or a 620 credit score. This is an OVERLAY. The lender OVERLAYS their own guidelines on top of the TRUE guidelines making this process very confusing to many home buyers.
What Credit Score Do I Need?
It depends on the type of Mortgage that you are trying to obtain. In most cases, the Home Byers does not have a grasp on all of the mortgage products in the market and this is why I highly suggest using a Mortgage Broker. In most cases, a Mortgage Broker will have more programs available therefore giving you a greater opportunity to get into the BEST LOAN for your individual qualifications. The good news is that there is a lot of program in the market today to help those even with low credit scores. In most cases, a 580 Credit Score can get you into an FHA or VA Mortgage Program and a 620 minimum score is needed for all conventional programs. When determining your Credit Score, lenders do not use your Vantage Score. This is the credit score that you can obtain by sources such as Credit Karma and Credit Sesame. The TRUE CREDIT SCORE that lenders use is called your FICO Score. So if you are serious about buying a home in the near future I would highly recommend obtaining your FICO Score.
How Much Will I Need For A Down Payment?
You can get into a conventional mortgage with as little as 3% down, and FHA loan only requires 3.5% down and VA & USDA loans do not require any down payment. However, when obtaining a conventional with less than 20% down you will need what is called Private Mortgage Insurance (PMI) which we will go over in more detail later.
What Is The Mortgage Rate?
There are 7 Primary Factors that determine your Interest Rate. Also, Interest Rates vary from Lender TO Lender and this is why I highly recommend working with a Mortgage Broker.
- Credit Score:
- Home Location
- Home Price and Loan Amount:
- Down Payment
- Loan Term
- Interest Type
- Loan Type
How Much Can I Afford?
it is a good idea to meet with a bank or lender, who can help you determine a range of home prices that you may be approved to buy in. Lenders will consider how much a buyer makes, how much debt they have, any assets they own and their credit history before issuing a pre-approval letter, which details the amount they can purchase, providing their financial picture does not drastically change during the home-buying process.
How Much Will My Mortgage Payment Be?
What Type of Mortgage Should I Get?
There are TWO main types of Mortgages: Conventional or government-backed loans (FHA, VA, USDA)
A conventional loan is any mortgage loan that is not insured or guaranteed by the government (such as under the Federal Housing Administration, Department of Veterans Affairs, or Department of Agriculture loan programs). Conventional loans can be conforming or non-conforming.
Government Backed Loans:
- FHA loans, insured by the Federal Housing Administration, were established to make the home buying more affordable, especially for first-time buyers, by allowing down payments as low as 3.5% of the purchase price.
- VA loans are insured by the Department of Veterans Affairs and offer buyers low- or no down payment options and competitive mortgage rates. They’re available to current military service members and veterans only.
- USDA loans are backed by the U.S. Department of Agriculture and are geared toward rural property buyers who meet income requirements.
Do I Need PMI?
PMI or private mortgage insurance is something that lenders use to protect themselves against a buyer who defaults on their home loan. PMI is money a buyer pays along with their principal and interest to reimburse a lender in case they default. This fee is usually lumped into a buyer’s monthly mortgage payment until about 80% of their home is paid off, at which point PMI is typically canceled.
What Are ALL The Closing Costs??
You may be AMAZED by the differences in CLOSING COSTS when you start your search for a mortgage lender: How a Mortgage Broker can save you over $2000 in Closing Costs:
How Long Will The Mortgage Process Take?
The entire mortgage process has several parts, including getting pre-approved, getting the home appraised, and getting the actual loan. In a normal market, this process takes about 30 days on average, says File. During high-volume months, it can take longer—an average of 45 to 60 days, depending on the lender