Learn Top 15 Mortgage Questions to Ask Your Lender
2. Is it possible to secure a mortgage without a credit score?
One of the most often-asked mortgage questions, and the answer might surprise you. If you’ve paid off all of your debts—which we encourage you to do before purchasing a home—you may not have a credit score when you meet with a lender. This may cause you anxiety. But don’t give up; you can still get a mortgage.
You will have to go through a manual underwriting procedure if you apply for a mortgage without a credit score. Manual underwriting simply means that you will be required to supply additional paperwork for the underwriter to review personally. Your loan application may take a bit longer, but buying a home without the burden of additional debt is well worth the wait!
Not all lenders provide manual underwriting. Do some preliminary research to identify those in your area who would, such as Churchill Mortgage.
3. What is the distinction between being prequalified and getting preapproved?
To get prequalified, all you need is a quick talk with your lender about your income, assets, and down payment. However, in order for you to be preapproved, your lender must verify your financial information and submit your loan for preliminary underwriting. A preapproval requires a little more time and paperwork, but it carries a lot more weight.
Which is superior? Consider prequalification to be the first stage and preapproval to be the green light indicating that you’re ready to begin your house search. When sellers analyze your offer, a preapproval indicates that you are a serious buyer whose lender has begun the lending process.
4. What size home can you afford?
Purchasing “too much house” can soon transform your property into a liability rather than an asset. That is why, before you even begin looking at properties with your real estate agent, you should know what you can afford.
We propose that your monthly mortgage payment be no more than 25% of your monthly take-home pay. If you make $5,000 per month, your mortgage payment should be no more than $1,250 per month. You can afford a $211,000 home with a 20% down payment on a 15-year fixed-rate loan with our simple mortgage calculator.
With a low monthly mortgage payment, you’ll have enough money in your budget to meet extra costs of homeownership, such as repairs and upkeep, while also saving for other financial goals, like retirement.
5. How much should you put down as a down payment?
We recommend at least 10% down on a home, but 20% is preferable because it eliminates the need for private mortgage insurance. (PMI). PMI is a cost added to your monthly payment that does not contribute to the repayment of your mortgage.
Saving for a large down payment takes time and effort, but it is well worth it.
• You will have built-in equity when you move into your property.
• You can finance less, which results in a lower monthly payment.
However, if you purchase a home with little to no down payment and the market declines, you may be stuck with the property until home values recover. If you want to pay off your house quickly, why not start with a large down payment? That’s a smart strategy!
