Negosentro | What First-Time Home Buyers Should Ask Their Mortgage Lender | The process of finding and purchasing your first home can seem intimidating if you’re new to the territory. One of the most important steps in the process is finding a mortgage lender you can trust—this is critical when it comes time to put in offers since you’ll be entrusting them with your money. But if you’ve never worked with a mortgage lender before, how do you know what to ask them to make sure it’s a good fit? Here are a few to start.
1. What Is a Mortgage?
This question might seem simple, but if you’ve never purchased a home or worked with a mortgage lender, it’s a good idea to make sure you understand what you’re getting into. A mortgage is much different than paying rent, because you’re taking out a loan to fund the purchase of a home.
The purpose of a mortgage is to be able to afford a home purchase without having to pay it all at once. When you take out a mortgage, you agree to pay back the money you borrow to the mortgage lender over a period of time.
2. How Does a Mortgage Work?
If you’re a first time home buyer, you want to find a mortgage lender who’s willing to walk through the process from start to finish with you. There are two main components to a mortgage: the principal and interest. The principal is the total amount you take out in the form of a loan to pay for the home. You’re then charged interest on that amount by the mortgage lender, who’s going out on a limb to lend you the loan.
3. What Kinds of Loans are Available To Me?
There are all different types of mortgage loans to choose from, each with their one requirements and stipulations. Determining the best choice for you will depend on your unique financial situation, what you can afford, how long you expect to live in the home, and slew of other factors. Here are a few of the most common mortgage loans on the market:
- Conventional Fixed-Rate Mortgages
- Adjustable-Rate Mortgages
- FHA loans
- VA loans
- USDA loan
FHA loans are typically the best option for those with a lower credit score or those who can’t afford a costly down payment. The usual down payment price they can offer is 3.5% of the home’s value.
The most important thing to remember when it comes to choosing the right loan option is to find a mortgage lender who you can be open and honest with about your financial situation. This will help them better help you—that’s what they’re there for, after all. If you don’t feel comfortable asking honest questions about your financial standing, it could be a good idea to find a different mortgage lender.
4. How Do I Qualify for a Loan?
Qualifications will vary depending on the kind of loan you take out, but FHA loans are tried and true for their reliability. With more lenient credit card requirements and a low down payment, they enable many applicants to qualify for a home that they otherwise wouldn’t be able to.
Most home loans require a credit score of around 620, but an FHA loan requires a minimum score of 580. This is something you want to discuss in depth with your mortgage lender in order to understand exactly what requirements you need to meet in order to be approved for the loan you desire.
These are just a few of the many important questions you want to bring to your mortgage lender in order to set yourself up for success when it comes to buying a home. If you’re currently searching for a home, make sure you stay organized throughout the process with this printable house hunting binder from FHA Loans. Designed for first time home buyers to stay on track and successfully find the right home for them, it can help you stay organized from start to finish as you walk through your first home buying journey.