Know What to Ask Before You Buy A Home

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Happy couple qualifying for a mortgage loan.

Buying a home may seem overwhelming, but it doesn’t have to be. The more you understand about what to expect, the more confidence you’ll have in finding the right home for your needs. To help you along the path of homeownership, here are some common questions and answers for new buyers.

Q: Do I need to get pre-qualified or pre-approved for a loan? If so, when should I do each?
A: Many experts recommend that you get pre-qualified before your home search. That way you’ll know what you can afford and can stay within your budget during your search. You can usually get pre-qualified in just a few minutes and it can often be done online. Then, once you find a home you like and plan to make an offer within 90 days, get pre-approved. Pre-approval is a more extensive process than pre-qualification, but it still won’t take long to complete. With a pre-approval in hand, you’ll have the buying power you need to negotiate the best deal on the right home for you.

Q: What is the debt-to-income ratio, and why is it important?
A: Your debt-to-income (DTI) ratio is determined by taking the total of all your monthly debts (everything you owe) and dividing that amount by your gross monthly income (everything you make). Your DTI is used by your lender to help measure your ability to repay a mortgage. Typically the lower your DTI, the more loan options you’ll have.

Q: What are points and should I pay them?
A: Points are fees you pay your lender at closing in exchange for a discounted rate. Most people refer to this as buying down your rate. Using points can keep your monthly mortgage payment lower; however, these fees are added to your overall closing costs, so you’ll need to prepare for that extra expense. In many cases, using points makes sense if you plan to live in your home longer than six or seven years. Your loan officer can help you decide whether buying down your rate makes sense in your circumstance.

Q: What is a closing?
A: A closing is when you and all others involved in your mortgage transaction sign final documents and you become the owner of your home. Others in the transaction may include: your title insurance company, escrow company, lender or attorney – it all depends on the state you live in. Typically the closing is conducted in person with all parties present. In certain states, it can be done online or by mail.

The mortgage process doesn’t have to be stressful. Be sure that you select a mortgage lender who knows your area and understands your needs. Learn more about the mortgage process and find an experienced mortgage lender in your area by clicking here.