Updated, January 2018
If you’re a first-time home buyer, chances are you have plenty of questions about the whole mortgage acquisition process. This two-part article series is designed to answer your most common mortgage questions (FAQs) to help you gear up for your home financing journey.
See the first part of the list here.
Is there is a difference between a pre-qualification and a pre-approval?
Yes. In fact, it’s a pretty big difference.
A mortgage pre-qualification is most likely informal, and only serves to help the borrower get a range of the prices of homes he or she can shop for. The lender may ask the borrower about his or her income, debts, and other assets but it’s generally non-committal.
On the other hand, a mortgage pre-approval is a more serious deal with a documented proof of your commitment to a particular lender.
To be pre-approved, the lender will require you to provide similar documents as when you are applying for a mortgage including W2 forms, bank statements, and pay stubs.
In a seller’s market or in a market where there are more buyers than sellers, getting pre approved for a mortgage gives you an edge against competition. It lets the seller know that you are serious with your intention to buy the home and not just selling word.Looking for a lender? We can help.
Are there mortgage programs for first-time homebuyers?
Years after the trauma of the previous housing crisis has abated, lenders have slowly loosened standards to cater to the needs of borrowers locked out by the qualified mortgage rule of the Dodd-Frank Act.
This has allowed mortgage lenders to diversify their offerings. Now, there are mortgage programs that specifically cater to the needs of a niche market, those with low credit scores, those with unconventional income sources, and of course, the first-time home buyers who are finding it hard to navigate their way through the whole process.
To find such programs, talk to an experienced mortgage professional or realtor. Forward your questions about available options and if you can find some locally. Visit your neighborhood credit union/s and see what they have to offer. Explore grants and down payment assistance programs. The important thing to remember is to not get lost in your sea of choices. Always think long term and how one program can benefit you based on your plans.
Will my mortgage interest rate change?
Mortgage interest rates are very volatile and can change frequently, sometimes multiple times during the day.
Luckily, you’re in time for a great rate shopping since rates are still at historically low levels. But market projections say rates would climb sooner than later so you might want to take advantage of it now.
If you’re rate shopping to compare lenders, it’s important that you keep the intervals close to each other to be more accurate.
The volatility of rates is also a factor to consider if you want to lock in. That may require a bit of continuously monitoring rates and market projections. Significant socio-political events can easily shift rates and a single point difference can translate to thousands of dollars in mortgage payments.Start your mortgage journey today. Click here.
What are mortgage points?
There are two types of mortgage points: a) discount points; and b) origination fees.
Discount points are fees that allow you to buy down your interest rate, therefore lowering your monthly payment. Origination fees are points the lender uses to cover overhead costs for the loan.
It’s a great tactic to use if you want to save on your interest payment.
How much money do I need to buy a home?
It depends on the type of mortgage program you are using. For example, if you are using a conventional home loan program, you will have to pay for down payment (20 percent of the home’s purchase) and the costs of closing (2 to 5 percent of the overall loan amount). If you’re using a VA mortgage, you don’t have to pay for a down payment. You can also roll the cost of closing into the loan. The only thing you will need to pay upfront is the VA funding fee.
Common costs associated with buying a home include:
- bank attorney fees
- mortgage processing fees
- real estate attorney fees
- underwriting charges
The bottom line is, there is no plain estimate of how much you will need to lay out at the closing table. You must get to know your budget and your mortgage program.
How long is the mortgage acquisition process?
A typical mortgage process takes around 30 to 45 days to close, depending on how fast you lock your rates, how soon you forward the necessary documents, and what mortgage underwriting tools the lenders use – which by the way, has improved significantly in the past few years.
We hope that this meager list is able to help you decipher some of your concerns and questions about the mortgage process.Click to See the Latest Mortgage Rates»