Buying a home can be confusing and is definitely time consuming. But before you start frequenting open houses and even thinking about putting in an offer, be sure to sit down with a mortgage lender to learn how to budget your finances in preparation for your home purchase.
The first thing you need to do: Find a good, qualified mortgage lender who will give you the attention you deserve.
“I love it when people ask me ‘What hours do I work?’ The answer – ALL THE TIME,” said Jeffrey Miller, AVP of Mortgage Sales at Sunmark Federal Credit Union in Upstate New York. “We no longer live in a 9 to 5 world, so your lender has to be available when you are. Make sure you have someone to talk to after hours and even on weekends. At Sunmark, our loan officers give out their cell-phone number and are always able to work from home.”
After you’ve found a great lender, make sure to ask him or her the following questions during your sit down:
1. What is the interest rate on this mortgage?
When inquiring about your future mortgage, one of the first things you should do is ask your lender for a direct interest rate quote and the corresponding annual percentage rate (APR) for the loan. Having this information will help you better understand your interest rate, fees, points and other miscellaneous charges.
2. What mortgage types do you offer and which one is best for me?
The type of mortgage that you are offered depends on your mortgage lender. Mortgages can differ with respect to the amount offered, interest rates, length of repayment and payment type. Common mortgage types include:
- Federal Housing Authority (FHA) mortgages
- Veterans Affairs (VA) mortgages
- Fixed-Rate Mortgages (FRMs)
- Adjustable-Rate Mortgages (ARMs)
- Interest-only mortgages
- Reverse mortgages
- Jumbo Loans
After your mortgage lender takes a comprehensive look at your financial situation, they should be able to find a mortgage type that is most appropriate for your needs.
3. What should my down payment be?
In order to get the best rate and terms for your loan, it is recommended to put down at least 20%, if possible. While 20% is usually recommended, it is not necessarily required and the minimum down payment could depend on the type of loan that your lender recommends for you.
Are you interested in purchasing a new home in the near future? Check out our previous blog post on “How to Save for a Down Payment on a House” for some great tips and tricks to help you get started saving today!
4. What documents will I need to provide?
Lenders require proof of income and assets, which include recent pay stubs, W-2 statements, tax returns, and bank statements. More financial documents may be necessary to show your ability to pay your down payment and closing costs. It is important to have documents up-to-date and organized in order to prevent delaying your loan application. Keeping all required documents organized and forwarding them promptly when requested can help speed up your loan application process.
5. How long does the loan application process take and what can delay my loan being approved?
The time it takes to process a loan application can vary dramatically depending on the situation. A closing can take as little as 2 weeks or as long as 2 months depending on how busy the lender is, how quickly the necessary paperwork is provided and if there are any unexpected changes in your financial life. Typical changes to your financial situation that might cause a delay in your loan approval include a new debt, a fluctuation in salary, job change or a change in marital status. It is important to keep your financial life as stable as possible until your loan is approved.