Mortgages - What You Need To Know

Well over 5 million existing homes were sold in the US in 2018. Take into account new home sales as well, and that number rises even higher.

Clearly, masses of people successfully buy and sell properties each year, you’d be forgiven for thinking that the process is nice and straightforward.

In reality, though, that’s rarely the case. Indeed, the decision to buy a house in the first place is a big one to make.

After all, property is never cheap; for the vast majority of people, getting a mortgage is essential. Yet taking on this level of debt can feel like a major burden. Thankfully, it doesn’t have to be.

Having all the information helps you navigate the process and mitigate the potential for problems.

To do that, it pays to ask the right questions. Want to learn more?

Keep reading to discover 8 key questions to ask your mortgage broker or lender.

1. How Much Money Can I Borrow?

Not everyone will have access to the same amount of money to buy their property.

Lenders will vary the amount available depending on numerous factors. For instance, they’ll asses your current level of income, the amount of debt you have, and whether you’re currently working. Your credit score will also play a role in their decision.

Think about it. You’re unlikely to lend money to a friend when you know they’ve failed to repay people in the past. It’s the same deal between you and a lender.

They need to know you can afford the mortgage.

Knowing how much money you can borrow will help you find a suitable property. There’s no point finding the perfect place, only to realize you can’t afford the mortgage on it.

2. Am I Eligible for Any Special Mortgage Assistance Programs?

Some people qualify for particular mortgage programs.

These will have certain financial benefits to them in relation to purchasing your new home. For example, the government has a program for military veterans. First time home buyers also often qualify for support.

Be sure to ask the lender if anything applies to your particular situation.

3. What Types of Loan Are Available?

There are different types of loan available from the lender.

Not all of them are made equal. The best one for you will depend on your current situation and the housing market in general.

Fixed-rate loans, interest-only loans, and adjustable-rate loans are three types you might come across.

It pays to know about the different loan types and their relative pros and cons. The mortgage lender should outline this for you anyway. If they don’t, then be sure to ask them to explain.

You don’t want to go into a mortgage without understanding all the potential financial repercussions. Each loan has particular financial implications- some good, some bad. Know what you’re getting into before signing the dotted line.

Here’s a rundown of the different loans available.

4. How Much Is the Down Payment?

You want to know how much money you’ll need to put down too.

This down payment serves as an initial deposit on the house.

The amount you pay will have certain implications. A recommended sum is generally 20% of the overall asking price. That means you’d pay $20,000 upfront for a $100,000 house.

That’s no small sum of money and may sound out of reach.

Thankfully, it’s often possible to pay a smaller sum. This can be a lifeline to aspiring homeowners with less capital to draw upon upfront.

However, smaller down payments can result in additional monthly financial requirements. For example, you may have to pay private mortgage insurance on top of monthly mortgage repayments. Equally, the actual rates of repayment (and the interest on top) may vary according to the down payment too.

Ask your lender for recommendations on the best approach.

5. What’s the Interest?

You need to know how much the mortgage is actually going to cost.

That’s where interest rates come into play. Be sure to find a level that you’re comfortable with. Obviously, the lower the rate, the better for your bank balance!

Get a quote from multiple lenders as early as possible in the process. This will help you find the right deal.

The annual percentage rate (APR) is a way of comparing mortgages. It takes the interest rate and lender fees into account, in relation to the loan’s term. The end calculation provides a standardized figure. This, in theory, enables accurate comparisons to be made between lenders.

Be aware that the APR calculation isn’t always foolproof. Lenders miscalculate it; adjustable-rate loans can’t be calculated for accurately, and so on.

6. What Discount Points Are in Play?

Discount points are equivalent to a percentage point of the total mortgage amount.

1 point on the same $100,000 loan we mentioned before would cost $1,000.

Buying them from a lender leads to discounts on your interest rates.

When you get the interest rates quoted, check how many discount points are in play. See whether you can buy more or less, and what effect that would have on the interest. The more you buy, the lower the rate!

It’s also worth noting that these discount points are tax-deductible.

7. What Are the Total Costs Involved?

As you already know, buying a house isn’t cheap.

Part of the expense entails covering the numerous closing costs involved.

From loan origination fees and attorney fees to third-party costs like credit reports, there are all sorts of expenses involved. A loan estimate will be provided by the lender to approximate all the closing costs involved.

8. When Will We Be Able to Close?

You’ll probably want an estimate on the closing date too.

Unfortunately, this can only ever be an estimate. The process will vary in almost every case, in relation to a whole host of factors.

That said, it’s always worth having an idea of the closing date in advance. This sets realistic expectations.

Ask the lender for their closest estimate, as well as any potential delays they can predict.

Final Thoughts on Key Questions to Ask Your Mortgage Broker

There you have it: the essential questions to ask your mortgage broker or lender.

Millions of homes are bought and sold every year in the US.

However, the decision to buy a house is rarely an easy one to make. It’s a huge financial commitment, which usually requires a mortgage to cover. Asking mortgage lenders the right questions can help allay any nerves.

Knowing exactly what to expect and how to proceed is a crucial step to navigating the process successfully.

Hopefully, this post has highlighted the main answers you’re looking to find.

Are you looking to buy a house? Contact us today to see how we can help with your mortgage.