As a first-time homebuyer, you probably have a lot of questions about the process. You may be wondering how to find a good real estate agent, where you should live, what kind of house you want, how much you will need for a down payment, and how long it will take to get to closing. Each day, you may think of one more thing you need to research.
We asked one of our mortgage bankers to shed some light on the kinds of questions she gets from first-time homebuyers. She provided her top four questions, along with valuable insight as to why it’s important for you to ask these questions before buying a home. While we provide answers below to the questions, your mortgage banker will be able to tailor their answers to your specific situation and needs.
We recommend talking to the mortgage banker first.
By talking to a mortgage banker first, you can find out how much of a mortgage loan you can get approved for and then go house shopping.
A conversation with a real estate agent is definitely useful for your home search and to find out what kind of homes are available in a specific neighborhood. Knowing you’re approved for a certain type of loan will help you and your real estate agent narrow down your options and negotiate a strong contract offer with the seller.
TBD (To Be Determined) approvals allow you to shop confidently, knowing your application has been reviewed by an underwriter. A TBD loan allows your loan to be conditionally approved by an underwriter, before you even have your property picked out. This allows you to shop with confidence, and gives your real estate agent peace of mind that they’re showing you properties that fit within your budget.
A pre-qualification is good to have in the sense that you know that you meet some basic eligibility requirements to be considered for a mortgage. It’s a conversation starter with your mortgage banker. Your approval comes once your mortgage banker has had a chance to review your credit information, application and all supporting documentation. You will receive a conditional approval that lets you know that you can make an offer on a home with confidence that the financing will be available pending some type of condition like proof of homeowner’s insurance.
The interest rate is definitely important when it comes to your loan as it will determine how much interest you will pay to the lender during the lifetime of your loan. Lenders will advertise rates, but there are factors such as your credit score and down payment that may also influence your rate. You may also have other costs such as discount points or origination fees that need to be considered as you shop around. A lender who offers a certain low rate may have higher origination fees or have limited options for you.
You need to weigh all of the costs and the interest rate to identify if you are truly getting a good deal.
This is one of the most common worries for new homebuyers. Saving for a down payment can be a challenge. Start by opening a savings account at your bank for just a down payment and set up automatic transfers to that account each time you get paid. Consider these deposits just as important as paying a bill. But if you still feel like you have not saved enough, you can still talk to a mortgage banker about options.
There are several loan programs that don’t require a large down payment. Some allow friends and family members to help you with your down payment. There are state-supported down payment assistance programs for individuals who meet income guidelines. From time to time, there are even grant programs that help reduce down payments. You may even be able to get the seller of the property to cover your closing costs so that you can allocate more of your housing budget towards the down payment.
A mortgage banker is a valuable resource when it comes to questions you have about buying a house. You don’t have to wait until you have the house picked out to ask your questions. Your mortgage banker may also be able to help you locate a real estate professional or even a builder if you are thinking of starting from the ground up.