Whether this is your first time buying a home or you’re a seasoned homeowner onto the next, we know you have questions. It’s also likely that you aren’t sure what questions to ask, especially if you’re a first-time homebuyer. To help you prepare your questions and organize your thoughts, here are some questions to guide these important conversations with your loan officer.

1 – Ask Your Loan Officer: What credit and income qualifications do I need?

The Breakdown: Your credit score and income both play a role in what you can qualify for. General requirements lenders will look for include:

  • Credit score requirement: Most lenders look for scores that are at least 620 or higher. While lower scores may qualify, higher scores offer better terms.
  • DTI ratio: Your debt-to-income (DTI) ratio is a calculation of your monthly payments, including your mortgage, compared with your gross monthly income. Lenders calculate what you can afford based on this. They may not approve your application if your debt obligations are pushed above 43% of your gross monthly income.
  • Employment history: Your lender will review your current employment and may require two years of employment history at the same job.

2 – Ask Your Loan Officer: What loan amount can I be approved for?

The Breakdown: One of the most important things you need to think about is your budget. When you ask your mortgage lender this question, they’ll look at your income, assets, and credit. Once they assess your financials, your lender will show you what you will likely pay and take a look at each expense. They’ll also help you determine what amount you’ll need for a down payment.

3 – Ask Your Loan Officer: What repayment terms do you offer?

The Breakdown: A fixed rate mortgage has a set interest rate, which is determined from the beginning when you take out the loan. The rate, principal, and interest payment won’t change throughout your loan’s lifetime. An adjustable-rate mortgage (ARM) has an interest rate that can change over time at set intervals. They typically begin at a lower initial rate, but after this low-rate period ends, it adjusts based on the terms of your ARM (typically every six months or annually).

4 – Ask Your Loan Officer: What are my estimated closing costs?

The Breakdown: In addition to the down payment, closing costs are an often-overlooked but major expense when it comes to buying a house. Closing costs typically range between 2-6% of the loan amount and they cover a variety of fees:

  • Lender Fees
  • Third-party fees:
    • Appraisals, credit reports, verifications
    • Title insurance and settlement fees
    • Survey, inspections
  • Prepaid taxes and hazard insurance
  • Recording fees

5 – Ask Your Loan Officer: What will my interest rate and APR be?

The Breakdown: Your interest rate and annual percentage rate refer to what you’ll be charged for owing money to your lender. These are both based on some of the same information, although APR is a much more inclusive figure. The interest rate is the rate a lender charges you for owing money, which is typically calculated as a percentage of your remaining balance each month. APR is the annual cost of owing money to your lender, including your interest rate and all the lender’s other fees.

6 – Ask Your Loan Officer: Will I have to pay mortgage insurance?

The Breakdown: There are several different types of mortgage insurance that a lender may require you to get. Looking at different loan types can help you avoid or reduce your insurance cost. Things like improving your credit score and reducing your overall debt before you apply for your mortgage may also help you reduce costs.

7 – Ask Your Loan Officer: What kind of down payment assistance (DPA) programs do you offer?

The Breakdown: You may qualify for assistance on your down payment depending on where you live and your income. Be sure to ask which down payment assistance programs they work with, and what you may qualify for.

Homeownership is a big step, which is why we encourage any and all questions from the first time you meet with your loan officer. Find a loan officer in your area to get started today. We can’t wait to embark on this journey with you!