May 26th, 2019 7:15 AM by Jackie A. Graves, President
Do you have mortgage questions? You aren’t alone.
be complicated, but it’s important to understand your options. Knowing the
answers to your mortgage questions can empower you to make smart decisions,
whether you’re buying your first home or interested in refinancing your current
about your different mortgage options before you meet with a lender can help
you get the best deal on a house that will benefit your family for years to
Here are some
common mortgage questions you may have during the home-buying or refinancing
How do you qualify for a loan?
The idea of
meeting with a lender can be intimidating, especially if you’re buying your
first home. After all, this is probably the biggest purchase you’ll ever make!
Take a deep
breath and relax—you don’t have to be stressed. Think of your first meeting
with a lender as a get-to-know-you session. They’ll simply want to learn a few
basics about you and your financial situation.
the paperwork! Once your loan process gets started, be prepared to provide
Any debt you have
How much you plan to put down on your home
A good lender will clearly explain your mortgage options and answer all
your questions so you feel confident in your decision. If they don’t, find
a new lender. A mortgage is a huge financial commitment, and you
should never sign up for something you don’t understand!
It’s likely that your lender will approve you for more money
than you want to spend. But keep this in mind: Just because you qualify for a big loan
doesn’t mean you can afford it!
If you are
you ready to get prequalified for a mortgage loan, I recommend talking with Churchill Mortgage.
2. Can you get a mortgage without a credit score?
This is one
of the most commonly asked mortgage questions, and the answer may surprise you.
paid off all your debt—and I recommend you do before buying a home—it is possible
you won’t have a credit score when you meet with a lender. That might make you
nervous. But don’t worry; you can still get a mortgage.
If you apply
for a mortgage without a credit score, you’ll need to go through a process
underwriting. Manual underwriting simply means you’ll be asked to
provide additional paperwork for the underwriter to review personally. Your
loan process may take a little longer, but buying a home without the strain of
extra debt is worth it!
lender offers manual underwriting. Do a little research on the front end to
find the ones in your area that will, like Churchill Mortgage.
What’s the difference between being prequalified and preapproved?
conversation with your lender about your income, assets and down payment is all
it takes to get prequalified. But if you want to get preapproved,
your lender will need to verify your financial information and submit your loan
for preliminary underwriting. A preapproval takes a little more time and
documentation, but it also carries a lot more weight.
Which is better? Think of prequalification as an initial step
and preapproval as the green light signaling that you’re ready to start your
home search. When sellers review your offer, a preapproval means you’re a
serious buyer whose lender has already started the loan process.
How much home can you afford?
"too much house" can quickly turn your home into a liability instead
of an asset. That’s why it’s important to know what you
can afford before you ever start looking at
homes with your real
I recommend keeping your monthly mortgage payment to 25% or less
of your monthly take-home pay. For example, if you bring home $5,000 a month, your
monthly mortgage payment should be no more than $1,250. Using our easy mortgage calculator, you’ll find that means
you can afford a $211,000 home on a 15-year fixed-rate loan with a 20% down
conservative monthly mortgage payment, you’ll have room in your budget to cover
additional costs of homeownership, like repairs and maintenance, while saving
for other financial goals, including retirement.
How much should you save for a down payment?
putting at least 10% down on a home, but 20% is even better because you won’t
have to pay private mortgage insurance (PMI). PMI is an extra cost added to
your monthly payment that doesn’t go toward paying off your mortgage.
Saving a big down payment takes hard work
and patience, but it’s worth it. Here’s why:
You’ll have built-in equity when you move into your
On the flip
side, if you buy a home with little to no down payment and the market dips, you
could be stuck until home values recover.
If the goal
is to pay off your home quickly, why not get a head
start with a big down payment? Now that’s a good game plan!
How do you know which home mortgage option is right for you?
With so many mortgage options out there, it can
be hard to know how each would impact you in the long run. Here are the most
common mortgage loan types:
I recommend choosing a 15-year fixed-rate conventional loan. Why
not a 30-year mortgage? Because you’ll pay thousands more in interest if you go with
a 30-year mortgage. For a $250,000 loan, that could mean a difference of more than
term does come with a higher monthly payment, so you may need to adjust your
home-buying budget to get your mortgage payment down to 25% or less of your
But the good
news is a 15-year mortgage actually pays off in 15 years. Why be in debt for 30 years when you can knock out your mortgage
in half the time and save six figures in
interest? I call that a win-win!
7. How do interest rates affect your mortgage?
rates bring higher monthly payments and increase the overall interest you’ll
pay over the life of your loan. A low interest rate saves you money in both the
short and long term.
just like you can’t time the stock market, it’s nearly impossible to time your
home purchase with the best interest rates. The past five years have held some
of the most affordable interest rates ever, according to the Federal Home Loan
Mortgage Corporation, and their recent forecast predicts the trend will continue
It may be
hard to time your home purchase with the best interest rates, but there are
things you can do to get a lower rate. For example, a benefit of the 15-year,
fixed mortgage is that it has a lower interest rate than a 30-year, fixed
mortgage. Sometimes a bigger down payment can also help you get a better
The money you
pay in interest doesn’t ever go toward paying off the principal balance of your
home. That’s why it’s a smart move to get a low interest rate on your mortgage
and then pay off your house as quickly as you can.
How do you lock your interest rate?
mortgage interest rates can change day to day, locking your rate is an
important part of the mortgage process. Locking your interest rate guarantees a
certain interest rate for a specific period of time, usually between 30 and 60
cases, you can lock your interest rate as soon as your initial loan is
approved. However, most buyers wait until they have found a specific home to
purchase and are officially under contract.
Like I said
earlier, mortgage interest rates go up and down and there’s no way to time it
perfectly. You simply don’t know what the future holds. No one does. So don’t
spend time trying to time the market; instead, rely on your lender’s expertise.
If they say it’s a good time to lock down your rate, trust them.
charge a fee to lock your interest rate. Ask questions on the front end so you
know what to expect.
What are mortgage points?
points, or discount points, are a way to prepay interest to get a lower
interest rate on your mortgage.
point equals 1% of your home’s value. That means if you’re getting a $250,000
loan and have two discount points, you’ll pay $5,000. In most cases, a point
can reduce your interest rate by one-eighth to one-quarter of a percent.
recommend discount points because of how long it takes to break even on that
cost. In most cases, you’ll sell your house or could even pay it off before you
recoup the money you paid up front in points. Skip the points and focus on
putting as much money into your down payment as you can.
What does your mortgage payment include?
happens when you send in that mortgage payment every month? It’s nice to think
the whole amount just reduces your principal, but your monthly payment actually
goes toward a lot more.
the typical monthly mortgage payment includes:
If you want
to pay more on your mortgage, be sure to specify that you want any extra money
to go toward the principal only, not an advance
payment that prepays interest.
11. What is an escrow account, and how does it work?
payment may include additional costs like your homeowner’s insurance and
property taxes. These are annual expenses that are part of homeownership, and
the lender is at risk if you don’t make those payments.
can add the monthly portion of each of those accounts to your mortgage payment.
That money is held in an escrow account that is managed by a third party to
make sure those costs are paid on time.
When should I consider refinancing?
definitely think about refinancing if:
2. You can lower your interest rate enough to justify
the closing costs.
refinance from an adjustable-rate mortgage to a fixed-rate mortgage.
not worth it to refinance if you could lower your interest rate by half a
percent. But let’s say it’s going to take another eight years for you to pay
off your house and you could lower your interest rate from 6% to 4%.
On a $200,000
mortgage, lowering your interest rate from 6% to 4% could save you about $200 a
month. Over the course of eight years, that adds up to more than $19,000.
Closing costs to refinance a $200,000 loan cost an average of $2,000.(3) Is it worth it to pay $2,000 in
closing costs to save $19,000 over the long term? Probably so!
When it comes
to adjustable-rate mortgages, refinancing to a fixed-rate mortgage is almost
always a good idea. An adjustable-rate mortgage can go up and down, drastically
changing your monthly payment. That’s not a risk I want you to take. A
fixed-rate mortgage is your best option, even if you have to write a check for
the closing costs.
refinance to anything longer than a 15-year, fixed-rate mortgage. Remember, the
goal of refinancing is to pay off your house faster, not stay in debt longer!
already have a good interest rate on a 30-year, fixed loan, you don’t have to
refinance just to get a shorter term. It’s easy to pay extra on your mortgage.
Our mortgage payoff calculatorcan
help you estimate how much extra you need to pay every month to hit your goal.
refinancing? Talk to Churchill
What happens after you get preapproved for a home mortgage loan?
preapproved for a mortgage is just the beginning. Once the financial pieces are
in place, it’s time to find your perfect home! While it’s one of the most
exciting stages of the process, it can also be the most stressful. That’s
why it’s important to partner with a buyer’s agent.
agent can guide you through the process of finding a home, negotiating the
contract, and closing on your new place. The best part? Working with a buyer’s
agent doesn’t cost you a thing! That’s because, in most cases, the seller pays
the agent’s commission.
partner with a real estate pro who can save you time, stress and money on your
home purchase? I can connect you with a high-octane
real estate agent in your area who’s earned my
seal of trust.
How long does it take to close on a house?
time to close on a house is currently around 40 days.(4) Factors such as your loan type,
your financial situation, and the length of your contract can either lengthen
or shorten that time frame.
What happens at closing?
close, that new house and mortgage are officially yours. At the closing, you’ll
sit down with the professionals involved in your real estate transaction and
sign all the legal documents needed to give you ownership of your new place.
That’s pretty exciting!
be responsible for paying closing costs as part of the closing process. Closing
costs are typically 3–4% of your home’s purchase price. You’ll receive a
Closing Disclosure three days before closing so you know exactly what you can
If you have
questions about the closing process, talk to your real estate agent or lender.
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