4 Questions to Ask Your Mortgage Lender

So you recently made the decision to buy a home. Congratulations! However, soon after the initial excitement of purchasing your first home, your feelings quickly turn to anxiety once you find out just how many mortgage options are out there. Which one is right for you? What do you qualify for? How does the process of getting a mortgage even work? If you’re asking these questions right now, don’t worry – they’re all perfectly normal. An experienced mortgage lender will happily answer all of these questions and provide the guidance you need to make your home-buying experience a seamless and enjoyable process. 

Knowing which questions to ask your mortgage lender can give you the confidence you need to take this big step. Here are the top four questions you should ask your lender: 

What Kind of Mortgage Do I Qualify For? 

Perhaps the biggest question you need to ask your lender is what kind of mortgage you qualify for. This is because different circumstances may qualify for different mortgages. There are five common types of mortgages available to homebuyers: 

  • Conventional loan: Either conforming or non-conforming, conventional loans are ideal for those with higher credit scores (of at least 620), those buying larger-sized homes, or those who have previously filed for bankruptcy. In most cases, homebuyers will have to put down a larger down payment than with government-backed loans. With this type of mortgage, sellers are more equipped to assist with closing costs. 
  • Fixed-rate mortgage: With this type of mortgage, your interest rate will remain the same throughout the lifespan of your loan. In other words, you will always be paying the same monthly amount for either 15 or 30 years, depending on what you pick. This option is best for homeowners who want to settle in the area for the long term. 
  • Adjustable-rate mortgage: On the other hand, an adjustable-rate mortgage is one that comes with a fluctuating interest rate. Interest rates are dependent on many factors, including the economy, rate of inflation, and other changes in the real estate market. 
  • Jumbo loan: This type of loan may be beneficial to you if you are purchasing property in a high-cost area such as New York or Los Angeles. Buyers need to have a credit score of at least 700 in order to qualify, as well as put down a down payment of at least 10-20% of the total value of the home. 
  • Government-backed loan: There are three types of government-backed loans: VA loans, which are good for active-duty military, their spouses, and veterans; FHA loans, which are good for buyers who have a credit score of at least 500 and can put down a 10% down payment; and a USDA loan, which is optimal for those looking to the outskirts of the suburbs. 

Knowing what types of mortgages are available can help you feel confident that you’re getting the best value for your budget and circumstances. 

Are You Doing a Hard Credit Check? 

A hard credit check is when a mortgage lender (or any other type of professional company, such as a car dealership) runs a report to check your credit score as part of your application process. While these are necessary, they can also negatively impact your credit score, lowering them by as much as 10 points, which has the potential to put you in a different category of credit. 

While additional credit checks may not have a huge effect, if you’re shopping around with lenders, it’s important to be aware of this risk. Always ask your lender if they’re performing a hard credit check on you during your visit, and if so, try to have it done within a short span of time to help offset the effects this could have if your home-buying process ends up taking longer than expected. 

What’s the Difference Between Being Pre-approved and Pre-qualified for a Mortgage? 

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Photo by Soroush Karimi on Unsplash 

Chances are, you’ve received offers in the mail saying you were pre-approved for a new line of credit. This same terminology is used in real estate. Prequalification is simply the process of the lender determining whether or not it seems like you’d qualify for the loan. They will either ask you to be upfront about your current financial situation, including outstanding debts. Or they will pull a copy of your credit to see what you qualify for. 

Pre-approval, on the other hand, is when you’ll need to provide documentation such as your pay stubs and bank statements to know exactly how much you’re approved for. When it comes to buying a house, sellers are much more interested in seeing what you’re pre-approved for, rather than what you qualify for. It tends to be a better selling point and can give you an advantage over other potential buyers. 

Do I Qualify for Homebuyers Assistance? 

If there’s a way you could save money, what’s the harm in asking about it, right? There are many options available for homebuyers. They can reduce your down payment by thousands or even help with closing costs. While these programs vary from state to state, your lender will be familiar with the options available. For example, grants, deferred payments, and forgivable loans may be available to first-time homebuyers, first responders, and those in a certain economic bracket. 

As previously noted, your lender will let you know what programs are out there. If you’re eligible for them, they’ll tell you what steps you need to take to get one. 

Ready to Get a Mortgage? A Mortgage Lender at City Creek Mortgage Can Help

Buying a home is an exciting and sometimes scary process. The team at City Creek Mortgage can help put your mind at ease. We’ll let you know what kind of mortgage you qualify for so you can land the home of your dreams. 

We have years of experience helping new and seasoned homebuyers. When you’re ready, the team at City Creek Mortgage is here to help. Call us today at 801-501-7950.  

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