In 2018 alone, over 5 million existing homes were sold across the U.S. Factor in new home sales, and the figure increases even more.
With so many people successfully navigating the real estate market, you might assume buying a home is a breeze. But the reality? It’s not always that simple. Deciding to buy a home is a major life decision—especially when it comes to the financial side of things.
Property isn’t cheap, and for most people, securing a mortgage is essential. While taking on debt of this magnitude might feel overwhelming, it doesn’t have to be stressful. Knowing the right questions to ask your mortgage broker or lender can make the entire process smoother and help avoid potential pitfalls.
Curious about what you should be asking? Keep reading to discover 8 essential questions that can guide you through securing a mortgage.
1. How Much Can I Borrow?
Not everyone qualifies to borrow the same amount for a mortgage. Lenders assess your ability to repay based on several factors, like your income, outstanding debts, employment status, and credit score.
Think of it this way: if a friend who’s notorious for not paying back loans asks for money, you’d be hesitant, right? Mortgage lenders are similar—they need to feel confident you can afford the loan.
Knowing how much you can borrow upfront helps narrow your property search. There’s no sense falling in love with a home, only to find out it’s financially out of reach.
2. Do I Qualify for Special Mortgage Assistance Programs?
Certain buyers qualify for specialized mortgage programs that offer financial benefits. For instance, the government provides special programs for military veterans. First-time home buyers may also qualify for assistance.
Always ask your lender if there are any programs that fit your situation. You could be eligible for significant savings without even realizing it.
3. What Loan Options Are Available?
Mortgages are not a one-size-fits-all solution, as various loan types come with distinct terms and conditions. The best type of loan for you will depend on your financial situation as well as current market trends.
Fixed-rate loans, adjustable-rate mortgages (ARMs), and interest-only loans are a few common options you might encounter. It’s critical to understand the pros and cons of each, so don’t hesitate to ask your lender for a breakdown. The more information you have, the better equipped you’ll be to make a well-informed decision.
4. How Much is Needed for a Down Payment?
The down payment is your initial investment in the property, and it can have long-term financial effects. The recommended down payment is often around 20% of the home’s purchase price. That’s $20,000 for a $100,000 home—no small chunk of change.
Fortunately, making a smaller down payment is possible. However, this might come with strings attached, like having to pay private mortgage insurance (PMI) or facing higher monthly payments.
Ask your lender about the down payment options that work best for you.
5. What’s the Interest Rate?
Interest is one of the largest expenses you’ll face with your mortgage. Naturally, the lower the interest rate, the less you’ll end up paying over time.
To find the best deal, get interest rate quotes from multiple lenders early in the process. Also, pay attention to the annual percentage rate (APR), which factors in both interest and fees, giving you a clearer idea of the total cost. Just be aware that APR isn’t always foolproof, especially for adjustable-rate loans.
6. What Are Discount Points?
Discount points are initial payments that decrease your interest rate. Typically, one point is equivalent to 1% of the total mortgage amount. For example, on a $100,000 loan, the cost of one point is $1,000.
When comparing interest rates, ask how many discount points are in play. Sometimes buying more points can lower your interest rate significantly—and these points may even be tax-deductible.
7. What Are the Total Costs?
Purchasing a home involves several extra expenses, referred to as closing costs. These can include loan origination fees, attorney fees, and even third-party costs like appraisals and credit reports.
To avoid surprises, ask your lender for a detailed loan estimate, so you can see all the closing costs upfront.
8. When Can We Close?
You’ll probably want to know when you can expect to close the deal and finally move into your new home. Keep in mind that this is just an estimate, and various factors can affect the timeline.
Still, asking for an estimated closing date can help set expectations and allow you to plan accordingly.
Final Thoughts: The Right Questions Lead to the Right Mortgage
Obtaining a mortgage is one of the most important financial choices that most individuals will make in their lifetime. By asking the right questions upfront, you’re not only gaining a clearer understanding of the process but also setting yourself up for success. Whether you’re looking into FHA Loans or exploring other options, being informed is key to finding the best deal.
Are you considering buying a new home? If you’re in the St. Louis, MO area, get in touch with a Mortgage Lender St Louis MO to see how they can guide you through this important process. Contact us today to explore how we can help with your mortgage needs!
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