Buying a home is a big financial decision and, naturally, comes with a lot of questions, especially when it comes to financing.  With so many loan options available, it’s easy to feel overwhelmed. Choosing the right lender and the right loan program can make all the difference in your home-buying experience, from how smoothly the process goes to how much you pay in both the short-term and the long-term. Before committing to a loan option, ask your loan officer these four essential questions:

1. What Loan Options Do I Qualify For?

Not all mortgages are created equal. From Conventional Loans to FHA, VA, or USDA Loans, each has unique requirements and benefits. A good lender should walk you through the options you qualify for and explain which might be the best fit for your financial situation, lifestyle, and long-term goals.

2. What Will My Monthly Payment Be (Including Property Taxes, Homeowners Insurance, and Private Mortgage Insurance, if applicable)?

Many borrowers focus only on the principal and interest, but most monthly mortgage payments also include Property Taxes, Homeowners Insurance, and in some cases, Private Mortgage Insurance.

Further, the particular home you purchase may be in a community that has an HOA, or Homeowners Association. In those cases, the HOA will charge a certain amount in dues over the course of a year – some bill for all of it in just 1 annual payment, some require you pay one-half every 6 months, etc – there are even some that require the dues to be paid monthly.  Please understand that these HOA dues are NOT part of your Mortgage Payment because they are billed separately, however, you need to make sure you are aware of this additional expense that comes with the home!

Ask your lender for a clear breakdown so you know the true monthly cost and can budget confidently.

For your quick reference, the typical breakdown of the Monthly Payment is here:

• Principal
• Interest
• Property Taxes
• Homeowners Insurance
• Private Mortgage Insurance (PMI), if applicable

Again, HOA dues are important to be aware of but they are not included in the monthly Mortgage Payment.  These items listed above are part of the monthly Mortgage Payment.

3. How Much Money will it Require to Close the Purchase?

That’s a GREAT question!  A lot of folks are aware that they will have to pay a Down Payment, but that’s not all that has to be paid, unfortunately.  There are “Closing Costs” in addition to the Down Payment.

• What Are the Closing Costs?

Closing Costs are the costs associated with your Purchase, such as costs        associated with getting the Mortgage Loan, the Title Company Fees, your Escrow Account set-up, and government Recording Fees, among other things.  They can range anywhere from 2–5% of the home’s purchase price.  These fees often include appraisal costs, title fees, lender charges, and other things. By asking upfront, you’ll avoid last-minute surprises and understand exactly what it will cost to close on your home.

With my mortgage loans, I typically see Closing Costs range from 2.00%-2.50%.

• How Much Should I Expect to Pay as My Down Payment?

Down Payments can vary widely depending on the loan program. Some loans require as little as 3% down, while others (like VA or USDA loans) may require no down payment at all.

IMPORTANT NOTE:  The Down Payment amount will have a significant impact on your Mortgage Payment! 

You don’t want to consider different Down Payment options without having a clear understanding from your mortgage lender what the monthly payment would be for each option.  Generally speaking, “the more you pay now, the less you pay later.”  And vice versa, the less you pay now, the more you pay later.

4. What Factors Could Affect My Interest Rate?

Interest Rates are not at all “one-size-fits-all”; they’re primarily driven by your Credit Score, Down Payment Amount, and the Loan Type.  Sometimes, other factors such as your Debt-to-Income Ratio and Reserve Funds, among other things, can also play a role in determining your Interest Rate. When you work with me, I will help you secure the best possible rate. Sometimes a small improvement in your Credit Score or a slightly larger Down Payment can make a big difference in your Interest Rate which then has a big impact on your Monthly Payment and your total loan costs.

Final Thoughts

Asking these four questions will help you compare lenders, avoid unexpected costs, and choose a mortgage that works best for your personal, unique needs and goals. A trusted mortgage professional should always take the time to explain your options and guide you through the process. If you’re starting your home-buying journey and want expert advice tailored to your situation, I’d be happy to help. My goal is to make your home financing journey smooth and stress-free – let’s make sure you find the right home and the right loan, with confidence. Call me today at (214) 542-4095 or email Rob@TeamRobHomeLoans.com