CHOOSING A LENDER
There are many lenders with many different loan programs to fit the various needs of buyers in today's market. In order to find the best loan to fit your needs, we recommend meeting with at least two lenders and asking the following questions.
Lenders have different loan programs that vary in down payment amount, repayment terms, and interest rates. Ask which programs you qualify for.
The interest rate on your loan is the cost you pay each year to borrow the money. The interest rate does not reflect fees or any other charges you may have to pay for the loan.An annual percentage rate (APR) on the other hands reflects the interest rate plus any points, mortgage broker fees, and other charges that you pay to get the loan. For that reason, your APR is usually higher than your interest rate. Make sure you know both.
Depending on type of loan you choose, and the type and price range of the property you are purchasing, your required down payment amount can range from zero to twenty percent of your total loan amount (or more). You'll pay your down payment on closing day, along with any closing costs your lender requires.
Closing costs include all fees for the services and expenses required to provide you with a mortgage loan. This includes underwriting and loan origination fees charged by the lender. Prepaids include the costs of your taxes and home insurance for the upcoming year. Closing costs and prepaids are in addition to your down payment and can range from 2% to 6% of the total loan amount. It may be possible to have the seller pay for your closing costs and prepaids as part of the contract. Discuss this option with your lender and Realtor®.
Your mortgage payment is the monthly principal and interest payment you will pay for the duration of your loan until it is paid in full. The monthly payment is typically made up of four components: principal, interest, insurance, and taxes. If your lender requires private mortgage insurance (PMI), this amount will also be included in your monthly payment. Because taxes and home insurance premiums change, your monthly payment will change with it. Use one of our loan calculators to calculate your monthly payment.
If you're buying your first home, you won't have to worry about this question. If you already have an existing mortgage on a home and you're planning to sell it in order to buy a new home, you'll need to ask your lender what options you have for purchasing a new home. Will you have to sell first? Or can you purchase before your home is sold? Or should you consider a bridge loan? After talking with your Lender, discuss what you learn with your Realtor® so that you know what type of offer you need to make on your new property.
Loan pre-approval is based upon a number of factors, one being your current debt-to-income ratio. If you change your debt by buying a new car, for example, or you change your income by switching occupations, this may negatively impact your pre-approval status. Talk to your lender about what you should and shouldn't do prior to closing day so that you don't jeopardize your approval status.