What Should you Ask Lenders When Buying a Home?

Buying a home requires more than finding the perfect home. First, you need financing, or you won’t be able to buy the home.

Lenders have specific requirements when considering buying a home, so knowing what questions you should ask them is important.

How Much do I Need for a Down Payment?

Your down payment depends on the loan program you choose. For example, VA loans don’t require a down payment, but FHA loans require 3.5% down. Conventional loans require 5% down in most cases, and if you put down less than 20%, you’ll pay Private Mortgage Insurance.

Discuss your down payment options and how much you should put down to get the best rate and terms on your loan.

What’s the Best Interest Rate I can Get?

Interest rates are much higher this year than last, so you should talk to your lender about how you can lower your rates.

They’ll look at your qualifying factors and tell you what you can improve to ensure you get a lower rate. You can also ask about the possibility of buying the rate down (paying points) to lower the interest rate to keep it even lower.

When Should I Lock my Interest Rate?

You must lock your interest rate before closing on the loan, but your loan officer can tell you the best time to do it. Most rate locks are free for 30 days, but if you must lock it for longer, it might cost you.

It’s best to lock your rate after you sign a purchase contract, so you have a better chance of closing on the loan before it expires, but always ask your lender when it’s the best time to lock.

How Much are Closing Costs?

You’ll need more than the down payment to close on your loan. You’ll also pay closing costs. Most lenders charge 3% – 5% of the loan amount in closing costs. Ask your lender what the total cost of the loan is so you can budget accordingly.

Some loans allow you to wrap some closing costs into it if you don’t have the funds upfront. If you’re worried about affording the closing costs, talk to your lender about your options.

Final Thoughts

Knowing what to ask lenders before you buy a home is important. Mortgage financing is one of the most important aspects of buying a home. Without a mortgage, you’d need cash to buy a home, and most people don’t have enough cash for a purchase of that size.

It’s a good idea to get quotes from at least three lenders and to get to know their process. No two lenders offer the same rates and terms or have the same process. You might find one lender has an easier process and better rates than another, which can mean the difference of thousands of dollars!

Is the Shifting Market Bad for Buyers?

For quite a while, we were in a seller’s market. All sellers had the upper hand; most sold their homes for more than they listed.

Fast forward to today and that’s no longer the case.

Home inventories have fallen and interest rates have skyrocketed. So is this good news or bad news for buyers?

For now, it’s good for buyers – here’s why.

Less Demand

First and foremost, there’s much less demand. This time last year you couldn’t wait for more than a day or two to see a home once it was listed or it was under contract. Not only that, but it was under contract for much more than it was listed for and buyers were waiving appraisal contingencies.

Today, that’s not the case. There are not as many buyers in the market because of higher interest rates, so buyers have much more opportunity to look at more homes and bid what they want on a home, not what other buyers are pushing them to bid.

Reasonable Sellers

The selling craze of last year made sellers go crazy. They weren’t accepting offers even a penny below their asking price, and most were holding out for the highest bid above their asking price.

It makes sense why they’d do it, but it’s not fair to buyers who invest in these homes, spending more than the house may be worth in a few months.

Today’s market has much more reasonable sellers willing to negotiate prices and allow you to pay a fair price for the home. You also don’t have to feel pressured to waive the appraisal contingency.

Tougher Affordability 

There is one aspect of the shifting market that can be a challenge for buyers: mortgage rates. They’re at the highest in decades, with recent rates hitting over 6%. This could price many buyers out of the market.

The good news is you can shop around to get the most competitive rates, and you may even control your rate by perfecting your qualifying factors.

Before you apply for a loan, check your credit score and fix any issues you find. Stabilize your income and make sure you have a decent down payment. Don’t show up with the bare minimum requirements. Instead, show lenders you are a good risk and are serious about buying a home in today’s market.

Final Thoughts

The market is shifting, but that’s not always a bad thing. Buyers couldn’t continue paying overinflated prices for homes and not expect the bubble to burst eventually.

With things settling down, prices will decrease and buyers will have more options. Sellers may wait longer for their homes to sell, but everything won’t feel like such a frenzy. Instead, it will feel like a more relaxed process where everyone can get what they want from the real estate transaction.

If you’re ready to look at homes on the market today, contact me today, and let me help you find the perfect home.

How Long Does It Take to Close on a Home? 

Buying a house is exciting and overwhelming all at the same time. Not only must you find your dream home, but you must secure financing too unless you’re paying cash. 

The financing part causes a lot of stress for most people because they don’t know what to expect. One of the largest concerns I hear about is how long does it take to close on a home? 

How Fast can you Close?

When you sign a purchase contract, it’s natural to want to close right away. But it takes time. While it varies by lender, the national average is 48 days. With higher interest rates and a slow in the industry overall, you might see faster turnaround times, though. 

The Loan Closing Process

You might wonder what takes so long to close on a home. It helps to understand the steps lenders go through.

1. You get pre-approved before you look at homes. This allows the lender to review your credit score, income, assets, and liabilities. They use this information to make sure you qualify for any of their loan programs.
2. You work with a reputable real estate agent to find your dream home and sign a purchase contract. Once signed, you give the lender the contract along with any other conditions you can satisfy according to your pre-approval letter.
3. You open escrow. This is where you put money down in ‘good faith.’ This tells sellers you’re a serious and qualified buyer and are willing to risk your funds. A neutral third-party escrow company holds the funds until you close.
4. The lender orders an appraisal and title work on the property. This information tells the lender if the home is a good risk. Is it worth at least as much as you’re paying? Is the title clear? In other words, is the chain of ownership legal and are there any outstanding liens aside from the seller’s current mortgage? This process could take a couple of weeks.
5. Clear any outstanding conditions. At this point, to get to a clear to close, you must provide any straggling documentation the lender needs. Sometimes other issues come up when they review your paystubs, verify your employment, or look at your asset statements. Stay in touch with your loan officer and provide documentation as quickly as possible.
6. Close on your loan. Once you have the ‘clear to close,’ you’re free to close on the loan and take ownership of the home.  

Final Thoughts

It’s always worth asking a lender what their turnaround time is, especially in today’s market. Some lenders are moving much faster than others. If you have a closing date that’s sooner than 30 – 45 days, make sure you find a lender that can work within that timeline.

Some of how fast you close a loan depends on how well you cooperate with the lender. The faster you provide the documentation they require, the faster they can clear your loan to close. 

If you have questions about the buying process or would like a great lender referal, give me a call today!