Knowledge is power and knowing what to expect when buying a home will ensure you make the right decisions. Preparation helps you feel more confident and secure. If you are not sure what to ask, we’ve got you covered. Here are a few questions and answers to help you along the way.
1. How is my interest rate determined?
Your interest rate will be determined by your credit score, down payment, and loan type. The rate is used to factor your monthly payment. Of course, the less your interest rate is, the less your payment will be. If you feel your interest rate is too high or not feasible, talk to your mortgage specialist to find out what options you have.
2. Are there any fees associated with buying a home?
Yes. Closing costs on a home loan can range between 1-3% depending on the interest rate and loan type. Many buyers choose a slightly higher interest rate which provides a lender credit to reduce closing costs.
3. How is my mortgage payment determined?
As soon as you get the itch for a new home, it’s important to start thinking about your mortgage payment. Knowing what you can pay keeps you from falling in love with a home you can’t afford because it won’t be on your radar. Also, taxes, insurance, HOA, and interest (as previously mentioned) will be factored into the final payment.
4. Is a fixed rate or an adjustable rate right for me?
Loans with a fixed mortgage rate will remain the same for the 10-30-year period that you have your loan. Adjustable mortgage rates typically increase after a fixed period of between 3-10 years. Adjustable rates can be tricky especially if you’re not prepared to pay the higher rate. It’s important to thoroughly discuss and understand both options with your mortgage specialist.
5. Is mortgage insurance necessary or mandatory?
It depends. If you decide to make a down payment that’s less than 20%, you will be required to pay mortgage insurance. However, this is only required until your loan-to-value ratio is under 80%.
If you have questions or would like to discuss more options with a mortgage specialist, call us today at 949-356-6400 and we’d be happy to assist in the purchase of your dream home.