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Thursday, 27 June 2019
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This Old House - Do-it-Yourself

Frequently Asked Mortgage Questions

Written by Posted On Tuesday, 04 June 2019 08:15
Questions to Ask When Getting a Mortgage Questions to Ask When Getting a Mortgage Questions to Ask When Getting a Mortgage

What to Ask a Lender When Buying a Home?

When you are first considering taking out a mortgage, it would be a good idea to make a list of questions which you want to know the answers to, doing so, will save you a lot of time, and help you to arrive at the right decision before you sign on the dotted line. Purchasing a home, especially when it is the first time is a big deal.

The best home buyers get their financial ducks lined up well in advance of looking at homes. Part of the home buying process will be choosing a lender you are comfortable with. It will be ingenious to ask the lender a lot of questions. By asking lots of questions, you'll not only be more educated on the process but will put yourself in a better place financially moving forward.

The resource at Maximum Real Estate Exposure goes into significant depth on what to ask when buying a home. Here are a few of the really essential things to think about.

Do I Need to Have a Good Credit Score to Take Out a Mortgage?

One of the first things you should do when you consider buying a property is to check your credit score. Contact any of the big credit agencies such as Equifax or Experian. A better credit score will give you the opportunity to take out a mortgage at a lower rate of interest. In other words, a lender will consider a person with a good credit score less of a risk.

Trying to increase your credit score before purchasing a home is always a smart move.

How Much of A Deposit Payment Do I Need to Make?

It all depends on what the terms are on the mortgage, but you need to be prepared to put down at least 3 percent. There are some no down payment loan options still available such as a VA Mortgage and USDA mortgage. There are special qualifications, however, for you to get this kind of loans. For example, with a VA loan, you will need to have served or be serving in the military. With a USDA loan, you'll need to meet specific income restrictions and also be in a rural area.

When you put down less than a twenty percent down payment using a conventional mortgage, you will likely have to take out Mortgage Insurance. Private mortgage insurance is required by lenders when you don't meet the twenty percent down.

The more of a down payment you make, the less your mortgage will cost you. There should always be a balance. That all comes down to the cost of the property and mortgage terms. Keep in mind you may have to cash available to make repairs to the property. Blowing your entire deposit amount to reduce the mortgage interest rate may not always be the best thing to do.

Should I Go For a 15-Year or 30-Year Term?

One of the more prominent debates with folks buying a home is picking the length of a mortgage. A shorter term mortgage comes with a better rate of interest - that goes without saying. However, a longer-term mortgage will mean smaller payments per month. For instance, you can take the opportunity to put away money every month to pay off a lump sum on your mortgage every year. By doing this, you keep the security of smaller payments but can put cash towards the mortgage when you have the money available.

The idea may sound quirky, but it does work. Find a bank account with a reasonable rate of interest into which you can make regular payments. At the end of the year or the fixed term on the account, use the funds towards paying off part of the mortgage. Lots of folks will make an extra mortgage payment a year, which allows them to pay off their mortgage quicker and save a ton of money over the life of the loan.

Will My Mortgage Payments Go Up and Down?

More than likely, your mortgage payments will change if you have an adjustable rate mortgage. If you have a fixed rate mortgage, it will not. One of the most significant benefits of a fixed rate mortgage is the security of knowing your mortgage payments will not change. With adjustable-rate mortgages, it's possible you could get a lower interest rate out of the gate than a fixed rate loan. However, all bets are off that it will stay that way.

Most of the time, you are better off with a fixed rate mortgage unless you know for sure that you will be moving on from the home you purchase in a short period.

It is always a good idea to be prepared for ANYTHING when it comes to mortgages.  Having regular savings may protect you against some of those ups and downs. It is always an excellent idea to be putting money away in the event of a financial emergency. Nobody really ever knows for sure if they will lose their job or have to take a pay cut for some reason.

Being prepared for those kind of financial hardships is part of solid financial planning.

Should I Get a Pre-Approval?

Every buyer should get pre-approved before they ever start looking at homes for sale! If you are buying your first home, getting a mortgage pre-approval is almost an essential tool. This is where your bank or mortgage lender makes sure that you financially qualify for a mortgage. It is nearly the same as applying for a mortgage. The difference is that you are not taking out a mortgage against a specific property.

A pre-approval can save you time, and give you a smart advantage at the same time. Agents love the idea as it will make negotiations easier. It may even mean you will get a better "deal" on the property you are interested in purchasing. Sellers would rather deal with someone who is qualified to buy their home and has financing in place.

Do I Need Documentation?

As with all financial transactions, you will need documentation to get a mortgage. You need to prove your identity, and you need to verify your financial resources. That means information such as tax returns need to be made available.

Not all lenders ask for the same information. If you have an idea what borrowers you are planning to borrow the money from, it would be a good idea to check out what they need. Here is a comprehensive resource on what a lender will need to grant a mortgage. There will be different requirements depending on what type of loan you are getting. For example, what you will need to get a VA mortgage will be different than what is required of a conventional loan.

Final thoughts

Taking out a mortgage often seems like a laborious process. Lenders today require loads of documentation due to what happened during the great recession in the 2008-2010 time frame. Be prepared to do a lot of work when you are getting a loan. The better prepared you are, the faster you will be in your new home.

You will also find that being prepared will save you a lot of time and stress. Take some of the hassle out of your real estate transaction by having a well designed financial plan.

Other Realty Times Articles Worth a Look

Use the above resources to make the best possible financial decisions when buying a home.

About the author: Bill Gassett is a nationally recognized Real Estate leader who has been helping people buy and sell Metrowest Massachusetts real estate for the past thirty-two plus years. Bill has been one of the top RE/MAX Realtors in New England for the past decade.

In 2018 he was the #1 RE/MAX real estate agent in Massachusetts. His real estate advice has been featured on, CNBC, RIS Media, National Association of Realtors, Inman News, Placester, RESAAS, Credit Sesame, and others.

Bill covers real estate sales in the following Massachusetts communities: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton and Uxbridge MA.

Reach out for his advice anytime.

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Bill Gassett

One of the top RE/MAX agents in New England over the last decade plus. Providing exceptional real estate services to buyers and sellers in the Metrowest Massachusetts area including the following communities: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton and Uxbridge MA.

See my real estate website at Maximum Real Estate Exposure - one of the most visited real estate sites in Massachusetts.

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