Is There Anything I Can Do To Lower My Interest Rate
If you are preparing to buy a home, you can lower your future interest rate by improving your credit score. Even a difference of 10 points can reduce your rate. Additionally, you could provide a larger down payment on the loan.
If you already have a home loan, you may consider refinancing for a lower rate. Youll want to talk to your lender to determine if its an appropriate time or if you should wait a little longer for the rates to adjust.
What Loan Program Is Best
The best loan program is one thats going to meet your financial needs: taking into consideration what you can afford and what your future goals are. So, its extremely important to choose a lender that has your best interest in mind.
Some popular loan programs to consider:
- FHA Expect a low down payment, relaxed credit requirements, and affordable monthly mortgage payments. Its a popular, government-insured program for first-time home buyers.
- VA Veterans and active duty service members have access to incredible benefits like no down payment, no mortgage insurance, and some of the lowest interest rates in the industry.
- Conventional Choose between options with low monthly payments or shorter loan terms. And, depending on your down payment, you may be able to avoid private mortgage insurance .
- CHFA Specific to Coloradans, a CHFA loan can get a first-time home buyer into a new home for as little as $1,000 down. Plus, CHFA programs offer support with closings costs and even provide a first-time home buyer education class.
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What Is Your Closing Ratio
Every borrower should prioritize working with a lender who has a successful track record. So, ask what their closing ratio is, also known as a close rate. It means the ratio of completed loans compared to applications.
For loans that fall out of the pipeline, ask why. A low close ratio could mean they don’t have enough support staff, or signal other problems.
You also want to ask what they do well in the mortgage lending process in order to make their loans close and hopefully that answer is that he or she is detailed-oriented and has an open line of communication with borrowers, said Ward Morrison, president and CEO of Denver-based Motto Mortgage.
Also, be sure to ask mortgage professionals how they communicate with clients to ensure their style meshes with your own. If the broker prefers texts messages and you would rather have phone conversations, it could be a sign to move on to another professional on your list.
Tip: Looking to buy soon? Set yourself up for having your offer accepted on a home by getting preapproved for a mortgage prior to your home search.
What Is Escrow And How Does It Work
Youll probably hear the word escrow used for multiple purposes in real estate. During the sales process, the buyer may have to deposit cash into an escrow account when they go under contract. This is typically between $250 and $500 and acts as a good-faith payment. The seller would put the deed to the home in escrow at this stage. The money in the account goes to closing costs or the purchase of the house on closing.
Some lenders may require that a homeowner use an escrow account to put towards property taxes and insurance. If this happens, the escrow funds may be built into your monthly payment.
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Is There Anything I Can Do To Lower My Rate
Your rate is based on a number of factors including the type of loan you get, your credit history and how much money you can put down. By asking this question, youll have the opportunity to share information with your lender that could lead to a better rate, such as your ability to put down a larger down payment or other options. Before you apply for a mortgage, avoid opening new credit cards or taking out loans that involve a hard credit pull, which can lower your credit score. Keep your credit card balances low and pay your bills on time to show your mortgage lender that you are a responsible borrower.
How Knowledgeable Are You On Projects Like Mine
You, as an investor, are likely to see big benefits from working with a lender that has experience in your area of interest. For example, a flipper who finds a great deal for a rehab single-family residence in Denver is likely to get much more favorable terms from a local lender with years of experience funding those types of projects than from a lender that primarily finances commercial properties in another part of the state or country. The specialized lender might offer lower interest rates, require less documentation, have a shorter approval process, charge fewer points or provide other advantages to the investor because they recognize a great local deal as a lower risk loan.
However, this might be a hard question for investors to quantify because the answer is subjective. Since this will boil down to a judgment call on the part of the investor, here is a list of follow-up questions that may help you gauge the knowledge of potential lenders.
These questions will give you a feel for how large or flexible the lending organization is, how experienced it is, and how strict it will be on terms. Depending on your project type, you might prefer to work with a small self-funded lender that can move quickly on projects in a narrow range. Or you might prefer a large, well-capitalized firm that can offer lower rates or larger loans with more specific criteria for the deals they finance.
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Do I Need Excellent Credit To Get A Mortgage
You dont need perfect credit, but your credit score and credit history should be as clean as possible to qualify for the lowest rates. Some lenders will offer you a loan with a score as low as 580. However, the interest rates will likely be very high, and not all lenders are willing to go that low.
My husband and I have credit scores significantly higher than 580, and we still lost out because we were 10 points shy of the lenders preferred score . Additionally, keep debts as low as possible, as the amount you owe can seriously affect your ability to get a home loan.
Lenders want to know you have enough money to pay your bill and that you are responsible enough to make your payments on time.
How Long Will It Take You To Fund The Loan
There is a lot riding on your home closing on time. Your purchase contract may have a closing date, but thats no guarantee your lender will fund the loan on time. Carpenter said the average closing time is 30 days, but some lendersâespecially banksâcan take longer. Asking for timelines and getting preapprovedbefore you begin the process may save you from costly headaches later.
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What Are The Closing Costs
Closing costs are the final fees you’ll pay before the mortgage can be finalized. Appraisal, origination or processing fees, title insurance and the Lender’s attorney fees are some of the costs due at closing. When you make an offer on a home, talk with your realtor about asking the seller to pay a portion of your closing costs.
It’s important to know the fees associated with closing ahead of time so you aren’t caught off guard. After you apply your lender will provide you with a Loan Estimate listing the costs.
Can My Monthly Payments Change Over Time
If you have a fixed-rate mortgage, your payment will not change over time. You will pay the exact amount every month until you pay off the loan.
If you opt for an adjustable rate mortgage, your monthly payment can change. Monthly payments may also change if you take out a home equity loan before you finish paying off your mortgage.
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It Pays To Ask A Lot Of Questions
Theres a lot to consider when you buy or refinance a home.
From loan types to mortgage rates, points, and closing costs it can be tough to keep everything straight.
Thats why its important to ask your lender the right questions.
With a little savvy, you can make sure you fully understand your mortgage loan and terms.
And, you can suss out whether youre being offered a truly great deal or just a low rate which are two very different things.
What Costs Will I Pay At Closing
Your mortgage advisor can provide the specific dollar amounts of your closing costs. The typical closing costs for a home loan may include:
Attorney fees
Prorated taxes
For those who opt for impounds or escrows: a prepayment of some taxes and insurance
Tip: Ask about lender credit. At Solidify, 99% of our loans are low or no cost by using a lender credit to cover the closing fees and costs. To save on your loan costs, contact a Solidify Mortgage advisor today.
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Questions To Ask Your Mortgage Lender When Buying A House
There are a lot of questions when it comes to buying a house. Does it fit your needs? Is it in a neighborhood you love? Can you afford it? Will it pass inspection? You’re the only one who can decide if it’s the right home for you. However, your lender can answer many other questions about the mortgage. Here are a few questions to ask your lender when buying a home:
How Do I Get A Better Mortgage Rate
This takes time, regardless of the method you choose. The best way is to raise your credit score. With a higher credit score, lenders can lower your rate because youve proven to be a low-risk borrower. The other way to get a better mortgage rate is to wait around for interest rates to change in the housing market. Its in constant flux, so you may not need to wait longer than a couple months for interest rates to be more attractive. Its important to stay in contact with your loan officer during this time as they can inform you when rates change!
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How Much House Can I Afford
While being prequalified or getting a verified mortgage approval will help you define the top end of their budget, it doesnt mean that you should immediately go looking at houses in the upper end of your price range.
You dont want to end up spending so much on your house payment each month that youre unable to save for any emergencies that might come up. You also want to leave room in your budget for whatever sparks joy in your life. You should still be able to take the occasional trip and go to dinner with friends once a week, if thats your thing.
You can use your mortgage approval as a starting point for sure, but dont stop there. Before you hit the pavement to look at homes, youll want to take a hard look at your budget as well to determine a house payment you would feel comfortable with.
Keep in mind theres more to your house payment than the mortgage itself , and you also want to save between 1 2% of the purchase price for maintenance costs.
If youre looking for a guideline, its generally a good idea to spend no more than 33% of your monthly budget on housing costs. Any more than that, and you might be overextending yourself.
Which Type Of Mortgage Is Best For Me
As you have the conversation with a lender, make sure to give plenty of detail on your situation and answer any questions they have.
If they recommend a specific loan option for you, have them put that option or several options in writing so you can understand the differences and be educated about the strengths and weaknesses of each scenario. This would be a good time to ask about alternatives.
Never be afraid to ask why. If a fee or cost looks odd to you, make them explain it. If you feel comfortable that they seem to know what theyre talking about and have your best interest in mind, move forward. Otherwise, feel free to go elsewhere.
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Can You Approve Loans In
Underwriting is an important part of the mortgage approval process. During this step, the underwriter checks paperwork to make sure you qualify for the loan. In some cases, your lender may outsource this step to a third party. Otherwise, the underwriting processhappens in-house.
When you are trying to close on a home, time is of the essence. You may have a lot on the lineâsuch as earnest money, extra fees or the home. Carpenter said you should always confirm timelines with your lender upfront.
Real estate agents may believe in-house underwriting is an advantage, but its not, he pointed out. Experienced mortgage brokers know what to expect from lenders they work with. They know how to avoid delays in the processâand potential landmines.
At the end of the day, your eligibility is what is most important. If you cant qualify for the loan, in-house underwriting isnt going to make a difference, Carpenter added.
What Kind Of Down Payment Assistance Is Available And How Do I Know If I Qualify
There are a few down payment assistance programs available for the average home buyer, including:
FHA Loan: This type of loan requires a much lower down payment even with a lower credit score.
VA Loan: The VA loan may eliminate the need for a down payment entirely. If you qualify , this should likely be your first choice.
The Good Neighbor Next Door: Housing and Urban Development sponsor aid for individuals who work as police officers, firefighters, emergency medical technicians, and teachers . This program can reduce the cost of a home by up to 50 percent in some areas.
FHA Section 203 : This program targets fixer-upper homes. If your budget only allows for a home in need of a fair amount of repairs, you can borrow funds to help complete the work alongside your mortgage. Down payments on these loans can be as low as 3 percent.
Local help: Each state and county have their own agencies that can help with down payment assistance. You can find a list of these approved agencies from the Housing and Urban Development Department, also known as HUD.
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What Other Costs Will I Pay At Closing
Fees charged by third parties, such as for an appraisal, a title search, property taxes and other closing costs, are paid at the loan signing. These costs will be detailed in your official Loan Estimate document and your almost-time-to-sign Closing Disclosure. But the sooner you know what they are, the better you can shop, compare and prepare for them.
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How Long Will It Take For The Loan To Close And What Shouldnt I Do During That Time
It can take days, sometimes weeks, for you to be approved for a mortgage. Because of this, you can ask your lender what they suggest you should do and not do to avoid harming your credit score just before closing out the loan. You will also want to know when you can make plans to move, which will be dependent on your close date.
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How Long Until Im Pre
That is ultimately up to the type of mortgage you are applying for. It also depends on your financial situation. There are mortgages that take longer than others, but you can expect to hear news about your pre-approval status within a month at the most. Once again, a good mortgage lender will tell you why your application was denied and what you need to do to improve your odds of getting pre-approved.
What Costs Should I Expect
Saving for a down payment isnt enough. You should plan on paying for closing costs, too. The amount depends on the price of your home, where you live and the lender.
For example, McGuinness said buyers in Nashville can expect to pay 2% to 2.5% of their homes sales price. For a $300,000 home, expect to pay $6,000 to $7,500. Some of the individual expenses you may see in other markets may include:
- Appraisal fee
- Title – closing and escrow fee
- Title – lenders title insurance
- Title – owners title insurance
- State tax / stamps deed
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Do I Have To Sign All The Paperwork In Person
Because of social distancing requirements brought on by the coronavirus pandemic, signing closing documents electronically is becoming more popular and necessary.
A mortgage e-closing is likely to proceed faster than a traditional mortgage closing, and you’ll probably be better informed about whats happening every step of the way.
One other benefit of e-closings: Electronic documents can’t be submitted with a missing signature. On a paper document, a missing signature might not be detected immediately, causing headaches and delays.
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