Getting a loan on your home can be a daunting task! But it doesn’t have to be. Working with a trusted lender is the best way to seamlessly navigate through the lending process. I’ve rounded up a few of my most frequently asked mortgage questions to help you get a jump start on the home buying and financing process.
Do I have to put down 20%?
No! This is a common misconception. For a primary residence, there are a few 100% options and several with only 3% down! A second home you need 10% down and for a true investment property the min is 20% but the pricing is better with 25% down
How long does it take to get pre-approved?
A true pre-approval is the way to go. It takes away all the “what if’s” and a lot of the stress because we have the paperwork to back up what was on your application. When we give you your price range you can make an offer with confidence. The timeframe is really in your hands. Once we have all the necessary documentation it will take our team 24-48 hours max to review depending on the client’s situation.
What if my credit score isn’t perfect?
No worries! We are here to help you achieve homeownership! Most programs require a 620 credit score. If you are not quite there yet we are on your side to make this happen and will provide the steps to get there!
How do I get the best rate?
Credit is key here, especially in conventional loans. If you have a 740 credit score or higher that puts you in the best position for the lowest available rate and it tiers down from there. Other factors such as the type of property such as single-family home, condo, multi-unit homes, and manufactured homes play into it as well. For instance, a single-family home is less risky than a condo with shared walls and areas, so the differences in the property type plays into pricing as well. Other variants are the down payment amount and the occupancy of the home. The theme with all these factors is risk. The less risky, the better the pricing. A client with a 740 score buying a single-family home with 20% down would get the best pricing. Someone with a 650 score buying a second home that is a condo will have pricing add-on’s to adjust for the “risk” layers.
Should I choose a fixed-rate or an adjustable-rate mortgage?
With a fixed rate there are no surprises. The rate is fixed for the life of the loan and provides stability. An adjustable rate is fixed for a set period of time and then it can adjust subject to the index it is tied to, typically on an annual basis and with caps. The pro is that it is oftentimes lower than a fixed-rate mortgage initially. The risk is that after the fixed period you are at the mercy of the current market. The bottom line is it all depends on what your ultimate plan is. If this is a short-term hold and you know you plan to sell within a few years then that difference in interest rate may outweigh the risk of potential future rate adjustments. If you know this is a house you see yourself in for years to come, the predictability and stability of a fixed rate would be the better option.
What if I’m buying a second home?
A second home or investment property is going to require more of a down payment and will have some pricing adjustments but at the end of the day who would not want to have a place to decompress and near the beach! The icing on the cake is rates are still extremely low and through Covid we all realized most of us can work remotely! This gives more the reason to buy now and enjoy this time and also create home wealth.
How much will my closing costs be?
This depends on your individual situation but an average of closing costs (one-time charges between your lender, appraiser and closing attorney) are $3300. You will also have pre-paid items such as homeowners insurance, property taxes, and possibly homeowner association fees if applicable.
How soon can you refinance after getting a loan?
The minimum waiting time is 6 months or 6 payments made.
Will a refinance really save me that much money?
It all depends on the goal. Refinancing can help reduce your monthly payment, reduce your loan term, or you can do a cash-out and pay off consumer debt. If you are interested I would highly recommend talking to a loan officer about your personal goal and they can make some recommendations.
I hope this answered some questions you may have about financing your home! If you have any additional questions or are ready to start the process feel free to send me an e-mail at edavis@guildmortgage.net — I am happy to help in any way!
