Owning a new home is a huge milestone and one of the many individual life goals that we strive to achieve.
To achieve this dream, one has to figure out a reasonable and achievable plan to make owning a home a reality. After all, only a small percentage of people can afford to pay for a new home in lump sum given property prices nowadays.
In America, that’s about one percent of the population. The other 99 percent have to look for alternatives ways to fund this goal.
Going about the process of acquiring the funds to buy a new home may seem daunting. But that’s only because most people don’t know how to navigate the treacherous path of funding a house purchase. Heavily reducing the closing costs reduces what you need to save.
With the help of a mortgage broker, the home buying experience can be a memorable one. This is why a mortgage broker should be among the first stops a potential homeowner makes when looking for funding.
Importance of A Mortgage Broker
A mortgage broker steers their client towards the best mortgage lender for their needs. Choosing the right broker is key to achieving the goal of owning a new home because a good broker will provide insightful information on borrowing options and other critical must-knows.
The suitable broker has inside information about sensitive and actionable data concerning funding options that are aligned with their client’s interests and needs. However, don’t just take their word for it.
The only way one can really know whether the recommended mortgage lender is suitable for them is by asking loads of questions. There are two points to these questions.
One is to better understand the real estate landscape and second is to find out if the lender is a qualified fit. For example, seeing a local mortgage lender in Orange County is particularly helpful because they will provide tailored assistance suited to individual needs based on their experience in the community with Realtor resources who can additionally credit from their commissions towards a buyers costs.
Here’s a compilation of four frequently asked questions by would-be homeowners. Also included are tips and advice that will likely help a buyer know how to approach a conversation with a mortgage lending firm.
1. What loan type is most suitable to take?
Mortgage lenders will have a number of loan options for you. But a mortgage expert will seek to know more about an individual or a couple’s economic situation first in order to recommend loan options that are best suited to their benefit. This typically entails asking some personal questions.
Answering those questions as honestly as possible, positions the broker to better make the right and accurate loan recommendations that are more customized to one’s needs.
So it’s imperative that a buyer is forthcoming with answers to some private questions and any other information they can provide in order to be served with accuracy and provided with most pertinent loan options for their needs.
If one is comfortable with the lender, allowing them access to their credit report is also helpful in their assessment and informs the subsequent recommendation they will make.
Related: How to Get a Home Improvement Loan
Mortgage loan types include the following
- Fixed-rate loans – this mortgage loan type as the name suggests has a fixed interest rate for the entire period of the loan
- Adjustable loans – the interest rate is not fixed and is therefore adjustable on the outstanding balance based on market factors for the duration of the loan
- Negative amortization loans – in this type of mortgage loan, the principal amount owed increases when the borrower fails to make payments covering the due interest accrued on the loan.
- Interest-only loans – this is an adjustable interest loan that allows the borrower to pay the interest rates for the first few years.
Unsatisfactory answers or aggressive up-selling by the lender can be a put off prompting the borrower to research another more accommodating lender. With the help of a good brokerage firm, one should be able to find out which option is most suitable for their individual case in a friendly and transparent way.
2. What down payment is required to secure a home?
A common question for most prospective buyers is how much down payment is required to secure a home. Well, there’s no standard answer to that question.
However, the common answer that one will come across often is a 20 percent down payment. But for those who are well qualified, they might be pleasantly surprised to learn that they can pay a down payment of as little as 3 percent with some loan options.
A lender will be able to guide a prospect with all the pros and cons of every loan choice that they may want to settle for.
Interactions with a mortgage lender are often very enlightening and shed light on the importance of matters like credit score and credit history. They also are instrumental in walking one through the process of becoming a homeowner started.
3. What cost is involved in buying a home?
There’s nothing as disappointing as putting aside money for a new home only to find out later, that there are additional hidden charges that one needs to pay for.
Unfortunately, this happens a lot after one has settled on a property and is ready to commit to a payment plan. In part, it may be the individual’s lack of attention to detail but on the other hand, it may be the fine print that only industry experts like mortgage lenders can decode for their client.
Finding out exactly what all the cost of securing the home will be is an important question that a lender should be able to provide.
To avoid such inconveniences, an experienced broker will be able to provide a fairly accurate assessment of the overall expenditure to expect or put aside for a given home.
Although every home purchase is different, the following third-party vendor fees tend to cut across the board when calculating the overall cost of owning a new home.
- Title policy
- Credit report
- Pest inspection reports
- Recording fees
An experienced lender will be able to provide the overall cost ranging from the mortgage to third party vendor fees and any other ‘hidden charges’ that one is likely to stumble upon. By law, a prospective buyer is entitled to all this information on a document known as a loan estimate that should be provided by the lending institution.
4. Can lenders approve loans in-house?
When dealing with a brokerage firm, one might want to know whether they have the ability to approve loans in house or they have to rely on a third party to get that done. In most cases, they have to refer their client to a mortgage lending institution for the loan and typically FHA loans, as well as VA loans, take longer to get approved.
However, some brokerage firms who also double up as lenders meet government requirements and therefore have the authority to approve or disapprove loan requests. If one is pressed for time, then using such a firm may help reduce the amount of time that it takes to process a loan from a regular mortgage lender. Such mortgage brokerage firms do not have to send loans for FHA or VA approval hence the shorter funding turnaround time.
But if one is not overly pressed for time it matters little whether one goes through a firm that can approve loans in-house or one that has to send loans request to VA or FHA for approval.
In the case of the latter, it is imperative to know how long the loan processing will take. The average time for loan processing is between 21 days and 45 days.
This is crucial information as it is mandatory to have a closing date when writing a purchase contract.
Closing a transaction on time is a big deal as it can attract additional fees if the money is not in escrow by the closing date. As such, one has to work closely with the lender to ensure a smooth transaction process.
5. What are the interest rates?
Every loan has an annual cost for borrowing from the lender and this is known as the interest rate. The average rate paid on a monthly basis depends on one’s credit score and their lender’s terms for the payment.
Economic activity and investment fluctuations can influence interest rates. Also, factors like property location, the borrower’s debts, repayment history, records of bankruptcies and employment history also affect the interest rate.
Distant as the dream of owning a home may seem to many in popular cities such as New York or San Francisco, a visit to a local broker can change that perception.
For most people, an interaction with a broker in their community is often a revelation as to the real possibility of owning a home immediately or in the near future. Many people are pleasantly surprised by the fact that they may qualify to own a home or there are options to fast track funding for one.
Here at Mares Mortgage, we have built a solid reputation on honesty, a strong knowledge of financing and hands-on customer service. Contact us and see how we can make your home buying experience a great one.
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Happy House Hunting!