The mortgage process can be daunting, especially if you’re new to homebuying.
Questions abound: How much can you borrow? How do you qualify? And how can you secure a low rate?
Fortunately, you’re not on your own in this journey. It’s important to keep in contact with your lender and agent as you navigate the homebuying process. And here, you can get brief answers to five commonly asked questions about home financing.
Q: How much can I borrow?
A: The amount you can borrow depends on a number of factors, including your credit score, the loan program you use, your lender, how much debt you have and more. When you apply for preapproval, the lender will give you an idea of the loan amount you may potentially qualify for.
Q: How do I qualify?
A: Requirements vary by loan program and lender. For a conventional mortgage, you’ll usually need a credit score of at least 620 and a debt-to-income (DTI) ratio of 36% or lower. An FHA loan could allow for a lower credit score or higher DTI ratio.
Q: What type of home loan should I use?
A: That will depend on your goals and financial qualifications. FHA loans are a good option if you have a lower credit score, while VA loans are a smart choice for veterans and military members who meet the eligibility requirements. Conventional loans are popular for most other buyers.
Q: What is escrow?
A: An escrow account (held by a neutral third party) holds funds to protect everyone involved in a financial transaction. It will likely be used to pay your property taxes and other fees. You’ll put money into the escrow account at closing and as part of your monthly mortgage payment.
Q: How do I get the lowest interest rate?
A: There’s no magical way to get a low rate, but it can help to shop around for a lender, increase your credit score and make a larger down payment. Having a low DTI ratio might also help you get a lower rate.
Be sure to talk to your lender about your questions and concerns around home financing. And if you need help finding your next home, please get in touch.
