Searching for a new home can be a fun challenge. Finding a way to finance your home shouldn’t add to the stress, however it can because sometimes homebuyers aren’t sure what questions to ask. As a first-time homebuyer, you’ll really want to focus on asking the right questions to your real estate agent (if you have one), potential financing companies offering loans, and the seller of the home you’re purchasing. As a repeat buyer you may know the ropes, but these questions could still benefit you greatly.
When looking for a mortgage company or potential lender, you will want to make sure they are a good fit for you! Below are some suggestions for questions to ask when shopping around for your mortgage:
- How long are your loan terms and what terms do you offer?
The lifetime of a mortgage is important to know when you begin. Often homebuyers may expect a 30-year loan term. However, depending on the lender there can be a handful of options. The length of your loan will likely impact your monthly payment, interest, etc. You’ll also want to know this to see if there’s any penalty for early pay off in case that’s something you want to do. Some people choose shorter mortgage terms or early pay off to cut interest.
- What are your current rates?
While interest rates are mostly determined by the Federal Reserve and the demand for notes and bonds (depending on the rate in your loan), banks also play a role in what they offer based on what’s best for business and the current market. When it comes to individual lenders, they will offer you their specific rates (which are based off your credit score). There are many sites now that will let you compare ballpark rates to help you get a general idea. For exact rates, you do have to apply. Depending on the lender, they may also share a rate range with you without applying.
- Would the rate be a fixed rate or an adjustable rate?
This will depend on what’s offered. You may come across lenders who don’t offer both. Your fixed rate is what it sounds like, fixed for the lifetime of your loan (unless you refinance). Adjustable rates can go up and down based on amortization. You’ll weigh what option fits you best. Whether locking in a low-rate works, or if purchasing at a higher rate for the possibility of movement is better – the choice is yours.
- What are the down payment requirements?
This question is pivotal for many homebuyers. Often what you must put down makes or breaks you being able to purchase at a certain time. Lenders will usually be able to tell you what percentage of the down payment they require after you apply. This also depends on your credit score and the specific mortgage option you’re selecting. In some cases, the type of loan will require a specific down payment amount.
- Do you finance for mobile or manufactured homes? (Not all lenders will so it is important to ask ahead if you are planning on purchasing one)
If you are hoping to finance a manufactured home, it will depend on the lender. While manufactured home loans can be set up similarly to site-built homes loans, they do differ depending on if land is involved. Because there are specifics that relate to a manufactured home, you’ll have to find a lender who specifically does loans for them.
- What is your turn around time for closing?
If you need to be in or out of a home quickly then the closing timeline may be quite important to you. It really ranges as there are so many variables. However, lenders should be able to give you a ballpark once they know your specifics. If the timing doesn’t impact you that much, it will still be a great planning tool for you.
This list may not be all inclusive to every question a homebuyer may have, but it is a good start for those not knowing where to begin! We hope this helps to get you thinking in the right direction.
Additionally, keep in mind credit bureaus allow you to shop around for mortgages. This means 14 to 30 days after your first application for a mortgage, the bureaus allow you to apply to multiple entities (provided they code this as a “mortgage” with the bureaus). The first time you apply will show as a hard inquiry and drop your credit score, but up to 4 more within that timeframe will only show as a soft inquiry which means it won’t lower your credit score. Be sure to verify this when you are applying.