There are tons of question that home buyers have before purchasing their dream house. In this blog we will provide the answers to 11 of the most usual questions every first time home buyer has.
1. How much mortgage can I afford?
As a first time home buyer, you might want to consider asking this question first so you can handle your expectations, begin with the mortgage process and plan how much budget you need to allot.
2. What do I need to be qualified for a loan?
Mortgage lenders usually examine the employment history, credit score, your debt-to-income ratio, and how much down payment you're willing to pay for your home in order to make sure if you are qualified for a loan.
3. Should I get a fixed rate or adjustable rate mortgage?
Most of the first time home buyers are torn between getting a fixed rate or an adjustable rate mortgage. Fixed rate loans have an interest rate that is set when you get the loan. Fixed rates do not change, while interest rates on an adjustable rate mortgage is subject to change. Adjustable rates will often start out lower than a fixed rate, but could go up after an initial period.
Homeowners who expect to move within a few years might want an adjustable rate mortgage because the interest rate might be lower in the short term, while those who wish to stay in a home for a longer period of time might choose a fixed rate for better stability.
4. What is PMI?
PMI is the acronym for private mortgage insurance. Usually, lenders recommend that you pay for PMI if you deposited less than 20% down payment on a home, and PMI would protect the lender if you failed to pay your loan.
5. Should I get a 15 or 30-year mortgage?
15-year mortgages generally charge lower interest rates, but they generally have higher monthly payments than 30-year mortgages because borrowers have half as long to pay off the loan. 30-year mortgages generally have higher interest rates than 15-year mortgages, but borrowers have more time to pay off the loan. It’s important to consider your needs when trying to determine the loan term that is best for you.
6. How much should I put down?
If it’s affordable for you, a good rule of thumb is to make a 20% down payment. Put down a more substantial down payment if you want to be able to pay off your house quickly or have lower monthly payments.
7. What are mortgage points?
Mortgage points, or discount points, are an extra fee that you can pay in exchange for a lower interest rate. Homeowners who plan on keeping a house for a longer period might choose to buy points because the lower rate will save money in the long term.
8. Will I have to pay closing fees?
Check with your lender to know the details about closing fees because every mortgage lender is different. Closing costs can include things like appraisal fees, attorney fees, title insurance fees, documentation fees, and pre-paid taxes and insurance. Closing costs can add up to several thousand dollars to the loan amount, and some of these fees can be purchased through a third party (which means that you might be able to shop around).
9. What is pre-qualification?
Pre-qualification can give you an idea about what mortgage amount you might be able to afford. Sometimes it can be done over the phone or via email, and it will only take into account the information you give the lender. Think of pre-qualification as a ballpark estimate. While pre-qualification is not a guarantee for a loan, it can be beneficial to help you learn your options.
10. What is refinancing, and when should I do it?
While this isn’t necessarily one of the top questions to ask as a first time home buyer, it’s good to know. Refinancing entails getting a new mortgage to replace an existing one, often to secure a lower interest rate, lower monthly payments, or get cash out If you’ve had your mortgage for a year or more and notice that refinance rates look lower than your current rate, you might consider contacting your mortgage lender. If you have substantial home equity and need cash, you might consider a cash-out refinance.