Most people think of a lot of critical questions before choosing a lending company. They will want to know how to apply for a home loan, which type of home loan they can use, and what amount they will receive.
If you’re looking for a lender, you probably have a lot of questions as well. And that’s a good thing. Coming to a lender with a list of hard questions is the perfect way to prepare for the process.
TwinCity Lending can help you answer the essential questions below. Reach out with all of your questions. We’ll give you honest answers based on your unique home buying requirements.
1. What are discount points?
Discount points are kind of like prepaid interest when arranging for a mortgage. This up-front payment is beneficial to you because it can reduce the rate on your mortgage, resulting in a lower monthly payment.
While they lower your interest rate, discount points also give you tax benefits and save on costs when buying a new home.
It’s imperative to ask your lender if the points are right for you. They are not appropriate for every situation. Also, be sure to find out how long it will take you to pay any other additional upfront costs.
2. What guidelines should someone follow to qualify for a loan?
Applying for a home loan is a process that requires an understanding of each part of the application process. Different lending companies have unique requirements in regards to each mortgage.
At a minimum, most lenders consider the following things:
Credit score: Every lender will require your credit score when you apply for a home loan. A higher credit score will result in a better chance of getting your loan approved quickly.
Qualifying income: Most companies will require you to have a consistent and sufficient income to be eligible for a loan.
Down payment: Some loan products require a 20% down payment. Some might not need a down payment at all. FHP loans include a 3.5% down payment, while VA loans often don’t require any down payment.
3. How long is the application process?
The mortgage application process begins when you present the required documents to the lending company. They will then determine your loan eligibility and let you know what else they need to move forward with a lending package.
They will consider many pieces of your finances in determining which loans you can qualify to use. Because of the research involved, the loan application process takes time. The more prepared you are with documents, the quicker it can move forward. Ask the lending company about their typical turn-around time before making your decision to use them.
At TwinCity Lending, we make sure you know exactly which documents you need, such as W2s and pay stubs. When you have those ready to go, we can close in two weeks.
4. What are the total closing costs?
This question is critical so that you have no surprises when it is time to sign all the papers. These are costs that are part of the loan application process and include things like title searches and recording fees. The charges can be between 2% to 5% of the total loan amount.
Ask your lender right away what the total closing costs will be. They can help you determine whether it would be better for you to pay the costs up front, or finance them as part of your loan.
5. What’s the down payment requirement?
Your home loan down payment is a percentage of the property’s purchase price. It gives you some immediate equity in the home and affects the amount of the loan you receive.
Most down payments fall between 5% and 20%. The amount you put down on the property affects the interest rate charged on your home loan. A higher down payment leads to a lower interest rate and vice versa.
Ask your lender if you’ll have to obtain private mortgage insurance (PMI). Generally, you need to carry PMI if your down payment is less than 20%.
6. What could delay the closing?
Lenders need enormous amounts of information to proceed to closing day. Anything that slows down their ability to process the data could delay the funding of the loan.
To keep the process moving quickly, be sure to do the following three things:
1. Sign all documents from the lender and real estate agent as soon as possible.
2. Be flexible in your schedule to ensure inspections and appraisals happen promptly.
3. Gather and forward requested documents to the lender right away.
7. What’s the interest rate?
Home mortgage rates are based on the rate set by the Federal Reserve. But your down payment and credit score also will impact the final rate a lender can offer you.
8. What types of loans are available?
Talk with your lender to determine which loan package is right for you.
VA Loans: Are you or have you been a member of the military? If so, you may be eligible for a VA home loan with no down payment.
Fixed vs. Adjustable-Rate Loans: Fixed-rate mortgages have an interest rate that does not change during the life of the loan. Interest rates on adjustable-rate loans will fluctuate.
Conventional Loans: These home loans, classified as either conforming or non-conforming, are not subject to tax by the federal government.
There may be even more loan packages that would work for your situation. Check in with your lender to make sure you choose the best option.
9. How much house can I buy?
During the pre-approval part of the process, your lending company will give you an estimate of how much you can borrow based on your credit score, available down payment, and the loan-to-value ratio.
10. Do you do a hard credit check?
A hard credit check is when a creditor or lending company thoroughly dissects your profile and credit history. Unlike a soft pull of your credit, this can impact your credit score if it happens too frequently in a short time.
A hard credit check answers all kinds of interesting questions about your credit history, so it’s a good idea to prepare for a thorough examination. If possible, get your credit report ahead of time so that you can clean up any mistakes or problems on there before applying for your home loan.
Ask the Experts
Are you ready to get into your dream home? TwinCity Lending is here to help you acquire the perfect mortgage package for your needs. We will walk with you each step of the way.
Contact us today to get started.