#3Cent Thursday | EPISODE 13
3 QUESTIONS TO ASK YOUR MORTGAGE LENDER
Let’s get into it!
QUESTION #1 – ARE THERE ANY AVAILABLE PROGRAMS FOR ME?
There’s programs out there that may help you when buying a home. Some of these are for first time home buyers, down payment assistance, reverse mortgages…there’s even a HomeFundIt program—which is like crowdfunding for your down payment! Sometimes it can be tricky to qualify for these programs—and often times the trade-off is higher interest rates—but using these can sometimes be the difference between not being able to buy a house at all, or increasing your purchasing power to allow you to buy in the neighborhood you prefer. Now regardless if you use one of these special programs or go with a more standard conventional or FHA loan, you definitely want to ask your lender what interest rate they can offer you as well. Additionally, you can ask about buying down the interest rate, which again, may be beneficial for some people, but not others.
QUESTION #2 – HOW MUCH MONEY DO I NEED?
What we’re talking about here is how much cash you need to bring in for your down payment. If you’re going with an FHA loan, the minimum down payment is 3.5% of the purchase price of the home. If you’re going with a conventional loan, the minimum was typically 5% down, although recently there have been some 3% down conventional loan programs available. It’s ok if you can only afford to put down the minimum, however be aware that any time you put down less than 20%, you’re going to have mortgage insurance. This is an extra fee a lender charges you basically because you’re not a strong enough borrower. Typically this amount is .5-1% of the loan amount every year. Let’s look at an example: if you took out a loan for $240,000, 1% of that would be $2400 a year. Now divide that by 12 months throughout the year and that’s $200 a month! Again, this amount will vary, but nobody wants to pay more if they don’t have to! So yes, a good goal is always 20% down, but especially as a first time home buyer that can be really hard to do, so don’t be discouraged if you don’t have 20% down. The great thing is with a conventional loan, the mortgage insurance can fall off payments to principal.
QUESTION #3 – WHAT WILL MY MONTHLY PAYMENT BE?
Sometimes what you qualify for will actually be more than the monthly payment that you’re comfortable with. Maybe you qualify for an amount where your monthly payment could be as high as $3000 a month, and you’re like, “Woah, that’s way too high for me! I want to keep it below $2000 a month (for example).” So you want to ask your lender what your total monthly payment will be, and when we look at this with homeownership, we are looking at what’s called P-I-T-I. This stands for: Principal-Interest-Taxes-Insurance. When you’re renting, you don’t have to pay property taxes, but unfortunately with owning, you do. So just make sure you get the full picture…what is your P-I-T-I going to be at whatever purchase price and loan amount you’re looking at.
Thank you so much for reading, and we hope you've found this information helpful! Please reach out if you need help finding a lender or further navigating the financial aspects of buying a home!