Buying a home is perhaps the most important financial investment you will ever make. First-time homebuyers and those who have purchased property often ask their mortgage lender many questions before making such a large, yet necessary, purchase.
If you are considering shopping for a new home, it can be an overwhelming process. At AAFMAA Mortgage Services LLC (AMS), you’ll have meaningful conversations that help us understand your financial situation and goals. We can design a mortgage program just for you.
Getting the Conversation Started
Before you begin shopping for a new home for you and your family, there are many things you will need to know. Here are 7 questions to ask your mortgage lender.
1. What Is the Maximum Amount I Can Borrow to Pay for a Home?
Mortgage lenders consider your debt-to-income ratio, or DTI, when considering how much money you can borrow for your home loan. They also consider your current employment status, credit history, and available funds to cover your down payment and other expenses.
When determining how much money you can borrow for your home purchase, your first step should be acquiring pre-approval. The best time to do this is before you begin looking at properties. Doing so will give you an idea of your budget and how much you are qualified to borrow so that you can focus on homes within your price range.
It is equally important to think about how much you can comfortably afford to pay monthly and annually, not just the maximum loan amount you can get.
2. How Much Should I Save for a Down Payment?
If possible, you should save 20% of the purchase price of a home to use as a down payment when you get a conventional mortgage. While a smaller down payment will not hinder you from getting the loan you need, your lender may add private mortgage insurance (PMI) to your loan. A monthly PMI premium is then added to your regular mortgage payments.
In most cases, PMI is required when your down payment is lower than 20% of the purchase price. However, there are options, such as getting a first and second mortgage to purchase the home, which may help you avoid paying PMI.
For current and former servicemembers using the VA Home Loan benefit to purchase a home, lenders may not require you to make a down payment. They also may not require PMI if you are eligible for a no-money-down VA Home Loan, but you might have to pay a VA funding fee.
Your AAFMAA Military Mortgage Advisor can assist you with information on any relevant costs connected to your mortgage.
3. What Average Interest Rate Should I Expect?
Some lenders may charge upfront fees known as “origination points” that they add to your loan amount. There are also various fees for applications, appraisals, and title insurance.
When discussing details with your mortgage lender, make sure you understand all fees and closing costs, as these will impact your overall annual percentage rate (APR) and your monthly payment.
4. What Estimated Closing Costs Should I Expect?
Going into a home purchase, it is important to clearly understand the amount of your closing costs and/or additional fees that might apply when you sign the final paperwork. Closing costs will include the loan origination fees, attorney fees (if any), and appraisal fees
Your lender should provide you with an estimate of your loan that shows the projected amount of all the costs associated with your loan so that you can budget your finances appropriately.
5. What Might Delay My Closing?
This is one of the first questions to ask your lender if you are a first-time homebuyer. You need to be aware of any issues that might delay or hinder you from closing on the scheduled date.
Homebuying is a complex process with many stages and requirements. Delays are expected, and you can avoid many issues by keeping in touch with your mortgage lender. Make sure to provide them with any updated information as soon as you can.
6. What Types of Home Loans Are Available to Me?
Many different home loans are available for all types of homebuyers, and different mortgage lenders will offer different loan options. Some types of home loans are available to all buyers, while others require specific eligibility. Your mortgage lender can help you discover the options that make the most sense for you.
7. How Often Will You Communicate After Closing?
Good communication is the key to any successful transaction. Having a mortgage lender who will effectively communicate with you throughout the process is essential. First-time homebuyers should ask if their mortgage lender will follow up with them after the loan has closed. While this may not seem very important, staying in touch with your lender after closing will benefit you in the long run. When a mortgage lender contacts you after closing, they can offer valuable advice such as homeowner tips and other information to help you manage your mortgage easier. They may also check in occasionally to find out if your current mortgage is still serving your financial need
We’re Here to Help
AAFMAA Mortgage Services LLC is ready to answer all your home-buying and mortgage-related questions. Contact us online or call us at 844-218-6926 to learn more and get a free mortgage assessment today.
This article was originally published February 21, 2019.