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Home Tips & Strategy 21 Mortgage Questions You Ought to Know the Reply To

21 Mortgage Questions You Ought to Know the Reply To

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I thought it would be helpful to make a post that answers many of the top "mortgage questions" consumers are asking in one convenient place.

You should know the answers to all of these questions if you are serious about getting a mortgage and ready to buy a home.

In addition, it may be better to have these questions answered by an objective source than to obtain biased information from a loan officer or real estate agent after the mortgage application has started.

So without further ado, let's start.

Mortgage Questions and Answers

1. What is my mortgage rate?
2. How long is my mortgage rate valid?
3. How do you calculate a mortgage payment?
4. What is Mortgage Refinancing?
5. How much is my housing benefit payment really?
6. When is the first mortgage payment due?
7. What credit do I need to be approved?
8. What is an FHA Mortgage?
9. How much mortgage can I afford?
10. Do I have to pre-qualify for a mortgage?
11. Do I even qualify for a mortgage?
12. Why can I be denied a mortgage?
13. What documents do I need to provide in order to get a home loan?
14. What does a mortgage broker do?
15. What type of mortgage should I get?
16. How much deposit do I need?
17. Do I have to take out mortgage insurance?
18. What are Mortgage Points? Do i have to pay them?
19. Which closing costs are negotiable?
20. How soon can I get a mortgage?
21. How much does the mortgage lender make from me?

1. What is my mortgage rate?

We'll start with whatever seems to be everyone's primary concern and save money. Much like any other monthly payment that you are trying to negotiate, it depends on many factors.

But I can at least clear up a few points to give you an idea of ​​how things are going to go. Ultimately, the higher the risk you pose to the mortgage lender, the higher your mortgage rate.

So if you have bad credit and receive a low down payment, expect a higher interest rate compared to someone with a sound credit rating and a large down payment.

This is intended to offset the greater risk of missed payments, as data shows that those with questionable credit and low down payments are more likely to lag behind on their mortgages.

The property itself can also affect mortgage interest rates. If it's a condo or multi-unit investment property, expect a higher interest rate when all the others are the same.

Then it's up to you to take the time to browse, just like any other standard product.

Two borrowers with identical loan scenarios may get completely different interest rates just because of the purchase.

And someone who is worse off on paper could actually get a lower interest rate than what is known as a major borrower by simply taking the time to get multiple quotes instead of just one.

A Freddie Mac study found that home buyers who received more than one listing got a lower rate.

There is no single answer here. The more time you invest in improving your financial condition, shopping for various mortgage lenders, and familiarizing yourself with the process so you can negotiate effectively, the better you will be.

And of course, you can keep an eye on the average mortgage rate for an estimate of the current supply.

To sum up, compare mortgage rates like anything you buy, but take into account the fact that you could be paying your mortgage for the next 30 years. So take even more time!

2. How long is my mortgage rate valid?

Once you find that magic mortgage rate, you will likely wonder how long it actually lasts.

If you don't ask this question, then as the prices are not set in stone unless you specifically request it.

By that I mean setting the mortgage rate that you negotiate or agree with the bank / lender. Even if the interest rates change from one day to the next, your interest rate will not be fixed.

Otherwise, you're just floating your mortgage rate and taking your risk. Without a tariff lock, it's really just a quote.

Rates can generally be blocked for a period of 15 to 90 days or more, with shorter blocking periods being cheaper than longer.

3. How do you calculate a mortgage payment?

At some point in the mortgage process, you will be looking for a mortgage calculator to figure out your proposed payment.

You can see how the monthly mortgage loan payments are really calculated, or you can just find a payment calculator that does all the work and tells you nothing about how it comes to the final total.

Just make sure you use a mortgage calculator that takes into account the total housing benefit payment, including taxes, insurance, HOA fees, etc. Otherwise, you won't see the full picture.

4. What is Mortgage Refinancing?

As the name suggests, refinancing simply means getting new funding for something you already own (or partially own, like real estate).

It's like a balance transfer where you move your loan from one lender to another for better terms, other than a mortgage payout.

If you currently have a 6% interest rate on your mortgage but see that the refinance rates are now 4%, refinancing can make sense and save you a lot of money.

Essentially, a lender needs to repay your existing loan with a brand new loan at the lower interest rate.

There is also withdrawal refinancing that allows you to use your home equity while changing the interest rate and term of your existing mortgage.

If you currently owe $ 200,000 but your home is worth $ 500,000, you could potentially withdraw $ 100,000 in cash and your new loan amount would be $ 300,000.

Your monthly payments may not even increase when the interest rates are cheap and you have the money for everything you want.

Make sure you use a refinance or payout calculator to help you make your decision and consider the loan term, also known as your expected tenure in the property.

5. How much is my housing benefit payment really?

As mentioned in the question above, consider all of the elements of a mortgage payment, not just the principal and interest payment that you see frequently advertised.

It's not enough to look at P&I, you need to consider the PITI. And sometimes even the "A."

If you don't factor in the full payment of the home including property taxes and homeowner insurance (and possibly even personal mortgage insurance), you can be doing yourself a disservice in determining how much you can afford during the buying process.

You can check out my mortgage affordability calculator to see where you stand.

Whether or not you have an escrow account, mortgage lenders qualify you by considering taxes and insurance, not just your monthly mortgage payment.

6. When is the first mortgage payment due?

This depends on when you close your home loan and whether you pay prepaid interest when you close.

For example, if you close at the end of the month, your first mortgage payment will likely be due in just over 30 days.

Conversely, if you close at the beginning of the month, you may not make an initial payment for almost 60 days.

This can be helpful when you have to worry about moving and renovation costs, or when your checking account is a little light.

7. What credit do I need to be approved?

It depends on what type of mortgage you want to get, and what down payment you have, or whether it is a purchase or a refinance.

The good news is that there are many mortgage programs out there for those with low credit scores, including VA loans and FHA mortgages.

For example, the FHA goes as low as 500 FICO, Fannie and Freddie 620, and the USDA and VA don't technically have a minimum credit rating, although most lenders want at least 620/640.

If you are in good financial shape, bad credit may not be a barrier.

However, you can save a lot of money by having great credit on the lower interest rate you get as a better borrower.

Put simply, loan rates are lower when you have a higher credit score.

8. What is an FHA Mortgage?

Speaking of credit scores, FHA loans have very accommodative requirements for credit score. We're talking about scores as low as 580 that only require a 3.5% deposit.

That's pretty flexible. Of course, traditional mortgages can be taken out with as little as 3% down payment, although a credit score of 620 is required.

FHA stands for Federal Housing Administration, a government agency that insures mortgage loans to help low- and middle-income borrowers realize their dream of owning a home.

They're commonly used by first-time home buyers, but unlike VA loans, which are reserved for veterans and active military personnel only, are available to nearly everyone.

One disadvantage of an FHA loan is that regardless of the down payment, mortgage insurance is required.

9. How much mortgage can I afford?

This is where you need to take into account the home values, how much you are making, what your other monthly liabilities are, what you have in your savings account, and what your down payment will be to determine your loan amount.

From there you can calculate your debt to income ratio, which is very important in qualifying for a mortgage.

This is quite a complicated process, so it's difficult just to guess what you can afford or do a quick calculation.

There is also your level of comfort to consider. How much home do you finance comfortably?

And don't forget property taxes and insurance, which can make your housing benefit payment much more expensive!

10. Do I have to pre-qualify for a mortgage?

This is a good point to get prequalified.

This is an important first step in making sure that you can actually get a mortgage while determining how much you can afford. Two birds, one stone.

A more complicated process is a mortgage pre-approval, where you actually provide real financial documents to a bank or mortgage broker for review and they'll manage your balance.

Real estate agents usually require you to be pre-approved if they want to make a qualified offer.

11. Do I even qualify for a mortgage?

Oh yes, here is an important one. Are you actually eligible for a mortgage or are you simply wasting your and the lender's time?

While requirements vary, most lenders require two years of creditworthiness, a clean rental history, and permanent employment, and some assets in the bank.

As mentioned earlier, getting this pre-qualification, or better yet, pre-approval, is a great way to find out if the reality (a loan application) is worth it.

Even if you've been pre-approved, things can and must show up that turn a conditional approval into a rejection letter, such as: For example, an unnamed credit card, personal loan, car loan, or annoying student loan.

It's not 100% until it's funded.

12. Why can I be denied a mortgage?

There are probably endless reasons why you might be denied a mortgage, and new ones are likely being realized every day. It is really a fun business.

With so much money at stake and so much risk for lenders if they don't do their due diligence, you can bet that you will be screened pretty tough.

If something doesn't look right about you or the property, it cannot be ruled out that you will be denied the opportunity.

Those above student loans or credit cards can also come back to bite you, either by limiting the size of your credit or by lowering your credit scores below acceptable levels.

This doesn't mean you have to give up, just that you may have to go back to the drawing board and / or find a new lender willing to work with you. It also highlights the importance of preparation!

13. What documents do I need to provide in order to get a home loan?

In short, lots of them, from tax returns to paying stubs to bank statements and other financial data like a broker's account when using assets from such a source.

This process is becoming less bureaucratic thanks to new technologies such as validation from a single source, but it is still quite cumbersome.

You will also need to sign a lot of credit details, loan approval forms, statement letters, etc.

While it can be frustrating and time consuming, do your best to get all documentation requests back to the lender as soon as possible to ensure that you get your home loan completed on time.

Also, make sure you always send all pages with documents to avoid re-requests.

14. What does a mortgage broker do?

In short, a mortgage broker is a knowledgeable person who can guide you through the mortgage process by buying your loan scenario with any number of lender partners instead of just one.

They are middlemen who connect mortgage lenders with borrowers as opposed to you who work directly with a retail bank / lender.

If you've been declined in the past or you're facing a tough scenario, a mortgage broker might be just the thing to get this loan approval.

They may also offer a more personal experience if you want a hands-on approach rather than a call center or large bank, for example.

15. What type of mortgage should I get?

There are many loan options, including fixed rate mortgages and adjustable rate mortgages, as well as conventional and government loans such as FHA and VA.

While most homeowners default to the 30 year term, numerous other loan programs are available and some can result in significant savings depending on your plans.

For example, a 5/1 ARM with an interest rate of 0.75% could be below a fixed 30 year interest rate that is still fixed for the first five years.

You may want to start with the Fixed Rate vs. ARM argument and then continue from there.

Once you are comfortable with an ARM, there are many options available to you to explore.

Knowing that Fixed is the only way to get a home loan, you can determine if a shorter-term option like the 15-year Freeze is within your budget and in the best interests.

Also, consider the FHA versus traditional pros and cons to make sure you've covered all of your basics when trying to decide between these two loan types.

16. How much deposit do I need?

This depends on many factors including the home purchase price, the type of loan you choose, the type of property, the type of occupancy, your creditworthiness, etc.

I can tell you that there are still zero down mortgage options available in certain situations, including on USDA and VA loans, as well as widely used 3% and 3.5% down options.

In short, you can still get a mortgage with a relatively small down payment, assuming it is a condo rather than a vacation home or investment property. Just make sure you can afford the higher monthly payments!

17. Do I have to take out mortgage insurance?

Good question. The answer will match the down payment and / or existing home equity along with the loan type.

Basically, you want to have a mortgage lending value of 80% or less to avoid mortgage insurance altogether, at least when it comes to a home loan backed by Fannie Mae or Freddie Mac.

This means a down payment of 20% or more when buying a home or 20% + equity when refinancing a mortgage.

However, the FHA holds it on to everyone regardless of the deposit. So when you are getting an FHA loan, mortgage insurance is inevitable.

And even if mortgage insurance isn't specifically billed, if you don't have an LTV of 80% or less, you can argue that it is built into your interest rate or closing costs.

This is another reason to come to the table with a larger deposit if possible.

18. What are Mortgage Points? Do i have to pay them?

A choice is yours when it comes to points, although it depends on how the lender or broker defines points. Is it a discount point or a loan origination fee?

Either way, when you take out a mortgage, you pay to make sure the seller and / or company get paid. It's definitely not free.

Of course, these points can be paid for and / or included in the loan directly and out of pocket or indirectly through a higher mortgage rate.

This is part of the negotiation process and so is your preference.

19. Which closing costs are negotiable?

Many closing costs are negotiable, including some third-party fees that you can purchase like property insurance.

When you look at your Credit Estimate (LE), you can actually see which services you can and cannot buy.

Then there are the loan costs which you can negotiate as well. But not all lenders will budge. And some may not charge a direct fee as it is built into the tariff. And yes, you can negotiate prices too.

Also, watch out for junk charges or unnecessary charges or other unusual things.

You have the right to go through every single fee and ask what it is and why it is charged. And they should have a good answer.

20. How soon can I get a mortgage?

This is an easy to answer mortgage question, but it can still vary widely.

In general, you might look for anywhere from 30 to 45 days for a typical residential real estate mortgage transaction, whether it's a mortgage refinance or a home purchase.

Of course, a lot happens, so it's not uncommon for the process to take up to 60 days or even longer.

At the same time, there are companies (and related technologies) trying to cut the process down to a few weeks, if not less. So look forward to it in the future!

21. How much does the mortgage lender make from me?

Instead of worrying about how much the lender is making, worry about how well your offer is in relation to everything else out there.

I don't know how much Amazon makes buying a TV from them, but I may know that the price was cheaper than any other competitor.

The same goes for a mortgage. When you factor in closing costs, is the rate the lowest? If so, it might not matter what they do. Maybe everyone wins.

As long as you take the time to shop, negotiate, and structure the business the way you want, you should be able to sleep at night.

If you'd like other mortgage frequently asked questions answered, please leave a comment, drop me a line, or have a look around the site. There's a lot to read, and many of the answers you're looking for may already be here.

(Photo: Véronique Debord-Lazaro)

Don't let today's prices get away.

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