There are six questions that many first-time homebuyers are afraid to ask their mortgage professionals. While this is understandable, these are very important to ask. Let me explain why.
Today I want to address six extremely important questions that a lot of first-time homebuyers are afraid to ask their lenders when it comes time to buy a house.
1. “What do you need in order to get a mortgage?” Lenders want to see that you have a track record of paying off your debt and that you’ve established a responsible credit history. If you’re not quite there, you’ll need to pay off debt and establish good credit.
2. “How can I improve bad credit?” Sites and apps like FreeCreditReport.com and Credit Karma can provide you with a free credit report, so even if you have bad credit, using those can help you understand where you are and where you need to be. Speak with your mortgage professional about creating a plan to increase your score so that you’re in a better position to move forward with your real estate plans.
3. “What is the difference between a pre-approval and a pre-qualification?” For a pre-qualification, you give the mortgage professional a few pieces of information about your current financial situation—maybe your debt, your salary, or tax liability—in order to see roughly whether or not you’d qualify. A pre-approval, on the other hand, goes much deeper. For this, your lender fully investigates your finances in a verifiable way; it may take more time, but it will carry a lot of weight when it comes to making an offer on a home. If you’re serious about buying a home soon, having a pre-approval letter will better position you to compete with the other buyers in the market.
4. “How much of a down payment will I need to make?” The amount actually depends. There are a number of loan programs that offer reduced or zero-down down payments. There are also county and state programs offer down payment assistance. On average, you can get about $5,000 towards the down payment of your home. Again, though, it will ultimately depend on your credit, debt-to-income ratio, and other factors.
“There are over 2,000 programs at the country, state, county, and city level that can assist with down payments.”
5. “What about down payment assistance?” In addition to what was mentioned in point No. 4, some people also turn to private sources for assistance. Family members can gift you money to use towards a down payment, though those transactions will need to be fully documented for the lender. If that’s not an option, there are over 2,000 programs at the country, state, county, and city level that can help.
6. “What type of home loans are available?” There are still the core loan types—conventional, FHA, and VA. But every mortgage company or broker is going to sell a different product based on what their underwriters want. There are many variables, so the best thing to do is to be educated in a systematic, structured way. If you’d like more information on the pros and cons of different loan types, feel free to give me a call.
For any questions you have about the mortgage application process, you’re encouraged to reach out to me. I’d be happy to guide you through the steps of what you’ll need in order to reach your goals.