4 Questions To Ask Your Loan Officer Before Applying For A Mortgage
Are you thinking about buying a house? Congratulations! Shopping for a home is arguably one of the most exciting, purchases you’ll ever make. Understanding the rules of applying for a loan, as well as your loan options, is an important part of the home buying process. You’ll want to jot down a list of questions to ask your loan officer before you meet with them for the first time.
To help you get started, we compiled a list of four questions to ask your loan officer (along with some helpful answers to common questions we receive).
- Should I get a fixed-rate or adjustable-rate loan?
Fixed- and adjustable-rate mortgages are quite different, and understanding the pros and cons to each is important to your loan application journey. A fixed-rate mortgage has a fixed interest rate for the entire life of your loan, no matter what happens to the economy, home value or interest rates. An adjustable-rate mortgage has an adjusting interest rate based on a specific index. After researching your financials and learning about how you want to pay off your mortgage, your loan officer will be able to suggest which mortgage is the best option for your situation.
- Do I have to pay for private mortgage insurance?
Private Mortgage Insurance (PMI) protects lenders from the risk of borrowers defaulting on a loan payment. PMI is applied to mortgages when a buyer cannot put 20% down on a house. While PMI might sound like a bad thing, it’s actually not! It can increase your buying power and get you into your new home faster, among other things. However, there are ways to avoid paying PMI, like having a loan-to-value ratio of 80%, or having lender paid mortgage insurance if your equity is less than 20%.
- What documents do I need to fill out my loan application?
The home buying process can be a long, time consuming journey. Arriving as prepared as possible to an appointment with your loan officer will save some of that precious time. To complete your application, your loan officer will need what seems like an overwhelming amount of paperwork, including your bank statements, purchase contract, and more. The information you provide helps your loan officer paint a picture of your financials, and determine which loan programs would be the best fit for you.
- What factors determine mortgage application approval?
You won’t be the only one asking questions when you apply for a loan. To be seen as an attractive candidate for a loan, you’ll be required to answer the following questions, per lending guideline requirements:
- Do you have sufficient funds for your down payment and closing costs?
Your loan officer will request copies of your most recent bank statements from your bank or credit union to make sure you can afford your down payment and closing costs. Some loan officers also require you to have enough cash for the first two mortgage payments. If your bank statements do not reflect the proper amount needed, a monetary gift from a relative is also acceptable.
- Can you repay your debt?
You’ll be required to provide proof of employment and how much you earn, to make sure your debt-to-income (DTI) ratio is sufficient. Your income can be verified by providing a month’s worth of pay stubs and two years of w-2 statements.
- Will you repay your debt?
Your loan officer will run your credit score to get a sense of how much debt you currently have, and to see if you’ve been making timely payments.
- What is the house worth?
When the time comes, the home you’re hoping to buy will be appraised to verify its value fits your mortgage.
If you’re ready to buy a house and would like to get some of the above questions answered, send us a message! We’d be happy to put you in touch with one of our lending experts who can help you start your journey to homeownership on the right foot.
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