If buying a new home is on your radar, a good place to begin is by finding a great lender. Your lender can help paint a realistic picture of your path to homeownership from start to finish. Since purchasing a home may be your largest financial transaction, it’s important to go into the process as prepared as possible. There are a plethora of questions you’ll probably want to ask your lender as you go through the home buying process, but there are a few that are worth asking right from the beginning. Below, we’re highlighting five key questions to discuss with your loan officer.
1- What Loan Programs Are Available to Me?
There are many loan programs available to prospective buyers, each of which has unique characteristics that serve a variety of needs. From shorter-term mortgages to low down payment options and various interest rate options, there’s certainly a program for everyone. A few of the most common loan programs include:
- Conventional – Can require as low as a 3% down payment with some options. Homebuyers may choose a conventional loan because they typically offer bettering financing terms — usually resulting in a lower monthly payment.
- Government-Backed – Includes FHA, VA, and USDA; these options require a small down payment (some as low as 0% down) and have more credit flexibility.
- Adjustable-Rate – Can come with lower interest rates in the beginning, potentially allowing you to save more money upfront. The rate is subject to change based on disclosed terms and future interest movements.
- Fixed-Rate – Comes with a fixed interest rate for the term of the loan that allows for predictable monthly payments.
- Jumbo Loans – The Federal government has loan limits on most mortgage programs; a jumbo loan allows you to borrow more than the standard mortgage limit.
Your lender is a fantastic resource, as he or she will be able to walk you through the requirements and qualifying criteria of each loan option and give you a personalized overview based on your specific financial situation and goals.
2- What is the Average Interest Rate for My Mortgage Choice?
Another important factor in choosing a loan program is understanding the average interest rate for each type. You’ll find that conventional loans tend to have the most favorable interest rates, especially if you have excellent credit. With that said, the current market rates in 2021 are still low providing an excellent opportunity to purchase a home. Be sure to ask your lender about mortgage interest rates and the factors that could potentially impact the interest rate.
3- What Is My Down Payment Requirement?
Once you’ve worked with your lender to narrow down your loan program options, you can hone in on the specifics; namely, how much of a down payment will be required. The down payment percentage could have a very real impact on how much you’re willing to spend on a home since it’s calculated as a percentage of the total home cost. It’s important to understand exactly what your down payment requirements will be so you can set a budget for your home search and stick to it. Many loan programs have low to potentially no down payment requirement, so be sure to ask your lender.
4- What Should I Expect In Terms of Upfront Costs?
In addition to a down payment, other fees will be due when purchasing your home, called closing costs. This is a collective term for fees like appraisals, inspections, insurance premiums, attorney fees, escrow fees, and more. Often, an origination fee is included in this total and covers your lender’s processing and underwriting costs. Within 3 days of submitting your full loan application, your lender will provide you with a Loan Estimate that shows exactly how much cash you can expect to bring to closing.
5- What Is the Loan Processing Time?
According to Ellie Mae, the average loan takes 47 days from application submission to closing. There are many steps required in the home buying process and it can take time to track down and submit all of the required documents for your loan application. With the current state of the mortgage industry, the length of time has increased to accommodate increased volume. With that said, it’s not uncommon to get through the entire home buying process in around one month. It’s a good idea to discuss your ideal timeline with your lender early on so there are no surprises as you delve into the mortgage process!
There are many important topics to discuss with your lender as you navigate the home buying process, and at C&F Mortgage, our team is focused on guiding you every step of the way. Get in touch with one of our local industry experts today to discuss your mortgage needs and learn how to make homeownership a reality in 2021.