Whether you’re a first-time homeowner or a seasoned homebuyer, the process of working with a mortgage company and obtaining a home loan can always seem daunting. At Rocky Mountain Mortgage Company, we can make buying a home easy!
Take a look at some popular questions to ask mortgage lenders. If you want to learn even more or need assistance obtaining a loan, contact Rocky Mountain Mortgage Company online or call (915) 593-3111
What Types of Mortgage Loans Are Offered?
VA Loans: Department of Veteran Affairs (VA) loans are available only to veterans, active service members, and eligible surviving spouses.
FHA Loans: Federal Housing Administration (FHA) loans are designed for borrowers who have lower credit scores, incomes, and/or savings.
Refinance Loans: A refinance loan pays off a borrower’s original loan, typically with better terms that allow an individual to pay off their loan faster and at a less stressful pace.
Conventional Loans: A conventional loan is one that is not guaranteed by the government, such as VA or FHA, and is through a private lender.
1. How Do I Qualify?
When deciding which mortgage is right for you, it’s important to be open and honest with your lender about your current circumstances. This will help your lender determine which type of mortgage loan is best for you. From there, your lender will look over several factors to see if you qualify for a loan. This can include your credit, income, debt-to-income ratio, and accumulated assets.
2. What is the Difference Between Prequalified and Preapproved?
Prequalification gives you an idea of which homes are in budget based on a series of general financial questions.
Preapproval is an official and specific step of the process, requiring the verification of a borrower’s financial circumstances through paystubs, tax returns, and/or your Social Security card.
3. How Much Do I Need for a Down Payment?
Down payments vary based on the type of loan a borrower takes out. For instance, VA loans down payments are not typically required. Meanwhile, FHA loans require a minimum of 3.5%, and conventional loan payments begin at 3%. This is to say, if your home is $300,000 you would likely need to put down at least $9,000 at a 3% rate.
While these rates may seem low, it is to the borrower’s benefit to make a bigger down payment. Ideally, borrowers should aim for a 20% down payment ($60,000 for a $300k home) to lower the costs of monthly payments, interest rates, and length of the loan, and avoid Private Mortgage Insurance (PMI).
4. What Will My Fees and Other Payments Be?
While working with your mortgage lender, borrowers will finalize their down payment as well as the following monthly payments. Similarly, the lender will explain the two types of interest rates on your mortgage: the base rate and Annual Percentage Rate (APR), as well as closing costs, property taxes, and any additional rates.
There are plenty of numbers and terms to go through here. So remember, your mortgage lender is required to provide borrowers with a Loan Estimate, which is a detailed breakdown of the costs associated with your loan as well as a Closing Disclosure, a full and final account of all the costs so you are well-informed throughout the process.
5. Closing: What’s Next and Costs
Closing is the final step of the home-buying transaction. Here, you’ll sign two important documents: the mortgage note, the borrower’s written promise to pay back the loan, and the mortgage agreement.
Similarly, you’ll receive your Closing Disclosure three days beforehand so the terms, conditions, and costs are determined and clear. All that’s left is handing over the check and getting your keys!
30 Years of Providing El Paso Home Loans. You Can Be Next!
Buying a home is a highly involved process that can easily become confusing. Fortunately, there are resources for you! Visit the National Association of Realtors or talk to one of our experienced mortgage lenders for a better understanding of the real estate landscape. Reach out to us online or call (915) 593-3111 to start your homeowner journey today.