Today I'll answer some questions that you as a first-time homebuyer might be afraid to ask your mortgage lender.
With some mortgage lenders being so efficient and process-oriented, they may just run through the details of your lending experience without explanation once they get you on the phone. A couple things might get overlooked because of this, or you could miss out on different products that different mortgage companies have. This is why today I am going to share the six most important questions that first-time homebuyers are afraid to ask their mortgage lender:
1. What do I need to get a mortgage? Basically, you need a credit history that shows that you have paid debt and have been responsible about paying debt in the past. You will also have to have some sort of income so a lender can feel like they can loan you money and you will pay it back.
2. Can credit be improved if it's not great? Yes. In fact, I have some great local mortgage lenders that have credit repair programs and they would love to get you engaged in those and put you on the fast track to qualifying for a mortgage. It is important to try and do this well in advance only because if you do have to do some sort of credit repair, you will need to do it before you want to purchase so you can be ready to go. It is always better to talk to a lender sooner than later.
3. What's the difference between pre-qualification and pre-approval? There is actually a big difference when sellers are evaluating offers. A pre-qualification is when you can just call in to a mortgage lender and they will just pull your credit, look at your income, and say that you qualify. They haven't actually looked at any of your details. A full pre-approval is when you have actually supplied all of your tax returns, income, pay stubs, etc. to a mortgage lender for them to review. A pre-approval carries a lot more weight than a pre-qualification.
4. How much down payment do I need to get a mortgage and buy a house? This has changed a lot over the years and it depends on who you talk to. The fact that you need 20% down to purchase, however, is no longer the case. In fact, there are zero down programs. 0%, 3%, and 5% are the minimum down payments for most mortgages, so you really don't need as much to purchase as you think.
"A pre-approval carries a lot more weight than a pre-qualification."
5. Is there any down payment assistance available? There are actually lots of government programs as well as state and even some company programs in some parts of the country. Here in Michigan, there is a down payment assistance program, so if you are a first-time homebuyer, talk to your lender to find out more. You can also get down payment assistance gifted to you from family or friends so you don't have to have it all yourself.
6. What type of mortgages do I qualify for? Of course, there are the typical mortgages out there which most lenders are going to cover such as conventional, FHA, and VA. However, there are a few others that you might qualify for, such as the USDA's rural development mortgage. Or, there is the portfolio project through a local bank where the bank takes out the loan directly so you don't have to fit all the criteria perfectly.
With regards to the type of mortgage, you should know that condos are treated differently than homes for some mortgage companies. If you are thinking about purchasing a condo, talk to your lender because you could be looking at a warrantable or non-warrantable. Condos need to be approved by FHA and VA loans. With a condo, you'll typically want to align with some specialty lenders.
If you have any additional questions or are interested in buying or selling, please feel free to contact me. I look forward to speaking with you soon.