A stressful experience when buying a house can be, especially if your Beverly Hills Mortgage Broker doesn’t give you the right information or how to best help you.
This is why we have compiled 14 questions you should ask your broker or mortgage lender before you sign your home loan. This will ensure that you are prepared for whatever comes your way.
What are my fees and payments?
Your budget is an important consideration when you are looking for a home. It is important to know how much you can afford so that you can narrow down your search and set realistic expectations. Asking your Beverly Hills Mortgage Broker to estimate how much house you can afford will require them to review your credit, income, and assets.
After reviewing your financial statements, your Beverly Hills Mortgage Broker can provide you with an estimate of the monthly cost and breakdown of expenses.
Your interest rate, closing costs, and property taxes will be discussed, along with any additional fees that may be added to your monthly payments. In addition, your Beverly Hills Mortgage Broker can help you figure out how much down payment you will need.
What Types of Mortgage Terms Are You Offering?
There are many types of mortgage loans that may be right for you. Multiple programs might be right for you. It’s important to discuss your options with your mortgage lender. Ask your lender about these types of loans:
Conventional fixed-rate mortgages
The most popular type of mortgage loan is a 30-year fixed-rate conventional loan. Because the term is so long, monthly payments are lower, and the fact that rates are fixed means that your interest rate will remain the same throughout the life of the loan.
The longer your mortgage term, the higher the interest you will pay. If you are able to afford higher monthly payments, it might be worth considering a 20- or 15-year term.
Variable Rate Mortgages
ARMs have interest rates that change throughout the term of the loan, unlike fixed-rate mortgages. If you choose to obtain an adjustable rate mortgage, your interest rate will increase or decrease as the market fluctuates after the fixed period expires.
This can mean that your monthly mortgage payments may vary from month to month. Budgeting can become a challenge. There are limits on this loan type that limit how much your monthly payment and interest rate can rise over time.
FHA Loans
Federal Housing Administration (FHA) is more appealing to borrowers with lower credit scores, incomes, and savings.
FHA loans have lower credit score minimums and down payment requirements than most conventional loans. FHA loans have restrictions and limits on how much you can borrow. You will also be required to pay a premium for mortgage insurance.
VA Loans
VA loans are backed by the U.S. Department of Veteran Affairs, so they’re only available to veterans, active service members, and their surviving spouses. The interest rates on VA loans are generally lower and there is no requirement for down payment.
These mortgages come with some restrictions and fees. Eligible applicants should expect to pay funding charges and have sufficient funds.
What credit qualifications do you need?
A credit score is a three-digit number that indicates to lenders how likely you are to be able to pay back the money you borrow.
A mortgage loan is easier if your credit score is higher than average. However, you can still find ways to buy a home if you have bad credit – you just may have to pay more for your loan.
Each Beverly Hills Mortgage Broker has its own criteria for acceptable credit scores. It is important to ask your mortgage lender questions about credit qualification early in the process. You may also want to check with your lender if there are any special rates or offers for those with good credit.
Are You able to offer Mortgage Points?
Mortgage points (sometimes called “discount points”) are an optional fee that you can pay at closing to “buy” a lower interest rate and save on the overall cost of the mortgage loan. Each mortgage point costs 1% of the total loan amount.
If you borrow $150,000, you might be able to purchase mortgage points at closing for $1,500. Home buyers who intend to live in their home for many years will benefit from mortgage points. They can save thousands of dollars on their loan term.
Ask your lender if it is a good idea to purchase mortgage points. Find out how much each point will lower the interest rate and what maximum number you can buy.
What is an Escrow Account?
An escrow account is a type of neutral savings account that holds money for prepaid property taxes and insurance premiums. Escrow accounts are required for government-backed loans, but are optional for conventional loans.
Ask your lender whether you require an escrow account. Ask your lender if an escrow account is required. Also, inquire about the options for covering shortages. If you pay too much, you may be eligible for a refund. Make sure to find out how much money will be needed for escrow.
What is the Interest Rate and APR?
Ask your Beverly Hills Mortgage Broker about the interest rate so they can tell you how much interest you will be paying. Multiple factors influence your interest rate, such as your credit score and the location of the property you buy, the amount of your down payment, and the type of loan, term, and amount.
However, you should also ask your mortgage lender about the annual percentage rate (APR), because it provides insight into the full cost of borrowing money. APR includes the interest rate as well as the fees charged by the lender to originate the loan.
Ask your Beverly Hills Mortgage Broker for information about the adjustment frequency if you are looking to get an adjustable rate mortgage. Your adjustment frequency will help you determine how frequently your interest rate and therefore your monthly payment can change.
Are You able to lock your mortgage rate?
A mortgage rate lock is an agreement between you and your lender that says your interest rate will stay the same until closing, regardless of market movements.
Rate locks are essential because they make it easy to predict your loan costs. Rate locks are important because they ensure that your loan costs will not rise.
Ask your Beverly Hills Mortgage Broker for information about rate locks, including how long they are valid. Find out what the current market rates are (are they high/low) and how long they’re valid. You should also consider whether locking your rate is a good idea. If market rates drop after you lock your rate with a lender, some lenders will lower your interest rate. Make sure to consult your mortgage lender.
Is it possible to buy a house without my spouse?
It is possible to buy a home without your spouse, but it is not as simple as getting a loan and not having your partner sign the paperwork. If you reside in a state that has a community property statute you will need to share the ownership of any assets that you acquire during your marriage.
You can remove your spouse’s financial information from the paperwork if you live in a common law state. When you apply for government loans, certain types require that your lender consider your partner’s income and debts.
Ask your Beverly Hills Mortgage Broker if it’s possible to buy a home without your spouse; your lender should know whether you live in a community property state or a common-law state. Furthermore, ask about quitclaim deeds, which will allow you to add your spouse’s name to the deed later on if you choose.
What Type of Mortgage do You Offer?
There are two major categories of mortgage loans: conventional loans and government-backed loans.
- Conventional loansLenders can set their own credit scores and down payments, which are open to all.
- Loans backed by the governmentLenders are less likely to lend to them, which means they can have lower down payments and credit requirements.
- A government-backed loanFederal government insurance covers your home. This means that if it becomes difficult to pay your monthly bills, the government can help you prevent foreclosure. To be eligible for government-backed loans, however, you must meet certain requirements. To be eligible for a loan, you must meet the requirements of the U.S. Armed Forces.VA LoanTo get a job, you will need to live in a rural location.USDA Loan.
Some Beverly Hills Mortgage Brokers are not legally authorized to offer both government-backed and conventional loans. Ask your mortgage lender what types of loans they offer. You should be able explain the requirements of each government-backed loan to your lender.
Is there a minimum income requirement to buy a house?
You don’t need to earn a certain amount to purchase a home. Your income plays a major role in the amount of home you can afford. When deciding whether to lend you money, lenders consider all sources of income, including your commissions and military benefits.
Ask your lender how much income you need to buy a home and which streams of income they consider when they calculate your total earning power. Ask your lender for documents such as W-2s, pay slips, and bank account information to prove your income.
Are You able to offer preapproval or prequalification?
Both prequalification and preapproval are processes often misunderstood.
- PrequalificationA prequalification is where a lender asks questions about your income, credit score, and assets in order to estimate how much loan you could get. They don’t verify this information so the prequalification number can change easily if incorrect information is reported.
- PreapprovalYour lender will request official documents such as your W-2s and tax returns to verify your income, assets, and credit information during a preapproval. Your lender will then give you a precise mortgage loan amount.
Ask your Beverly Hills Mortgage Broker about the difference between pre-qualification and pre-approval, because it often doesn’t mean the same thing. Ask your Beverly Hills Mortgage Broker which one is best for you. The answer to this question will depend on how serious and committed you are to buying a home.
How much down payment is required to buy a house?
It might seem that you would need to pay 20% down in order to purchase a house. In some cases, however, you may be able to buy a house with only 3% down. Some government-backed loans allow you to obtain a mortgage with as little as 3% down.
The often-quoted 20% figure has to do with avoiding private mortgage insurance (PMI), which protects your lender in the instance that you default on your loan. PMI can be cancelled on conventional loans as soon you have built 20% equity in your house. Your lender will then automatically cancel PMI when you have 22% equity.
Check with your lender to find out about how much of a down payment you need to have at closing. Ask about government-backed loans. Find out if you are eligible for a 0% loan. Make sure to ask about PMI requirements, and when you can cancel PMI, if required.
What will the Closing Costs be?
Closing costs are processing fees you pay to your lender to close out your loan. Closing costs typically include origination fees, appraisal fees, title insurance, and attorney fees. The exact closing costs that you will pay will depend on your location, the amount of your down payment and how big your property is. Closing costs typically run between 3% and 6% of the loan’s total value.
Ask your lender what the average closing cost in your state is. Ask your lender about the average closing costs in your state. Also, inquire about which inspections and fees are required by law.
Are There Prepayment Penalties?
After you start paying off your mortgage, you may find that you have more access to funds than you initially thought and are able to pay off your mortgage early.
This option could save you thousands in interest if you are able to do so. But not all Beverly Hills Mortgage Brokers will allow this option. Ask your lender before you make any decisions.
Ask if they allow you to pay your loan off faster if you are allowed. These fees are often charged by mortgage lenders to discourage borrowers from making additional payments, refinancing at a lower interest rate, or selling their house before the loan due date. Beverly Hills Mortgage Brokers can recover some of the money they would have earned if you made monthly payments until the end of your loan term.
There are different types of prepayment penalties: soft and hard.
- With a soft prepayment penalty: Borrowers can sell their home without being penalized. However, they are subject to penalties if refinance.
- With a hard prepayment penalty: No matter if the borrower sells or refinances their home, they are subject to fees.
Ask your Beverly Hills Mortgage Broker about prepayment penalties. Prepayment penalties can vary from lender to lender. They can be quite expensive and render early payments unprofitable.