Finding the right mortgage lender can ultimately make a big difference in your overall home purchase journey. With Penn Street Mortgage, our team of mortgage brokers can make sure you have several options when it comes to a home loan option that works best for you.
But, the lender you choose can have a big impact on your financial situation, affecting everything from your monthly payments to the loan amount you can afford. To make sure you’re making the best decision, it’s a good idea to ask the lender some important questions as you prepare to buy a home.
Here are some of the frequently asked questions you should talk to your mortgage lender or mortgage broker about as you prepare mortgage application.
What Are the Basic Requirements to Get a Mortgage Loan?
When you want to get a mortgage loan, your mortgage lender will look at a few key things to decide if you qualify. They’ll check your credit reports to see if you’re good at managing money, your work history to make sure you have a steady income, and your debt-to-income ratio to see if you can handle making monthly payments. Usually, they like to see a credit score of 620 or higher and a debt-to-income ratio of less than 43%.
The qualifications can vary based on what kind of loan you’re applying for and some other factors. But if you’re curious what you qualify for, you can reach out to our team at Penn Street Mortgage to start the pre-approval process and get a clear picture of your loan options.
What Types of Mortgage Loans Do You Offer?
Before you even think about rates, it’s important to understand the different types of mortgage loans available. Some lenders only offer one type of loan program, while others have different loan products to fit your specific situation.
Some of the most common type of home loan options are:
Fixed-rate mortgages
Fixed-rate mortgages are pretty simple — With this type of loan, you’ll have the same interest rate and monthly payment for the whole time you’re paying it off. The benefit of this option is that you’ll know exactly what you’re paying each month and your interest rate won’t change. This can be a great option for those who plan to stay in their new home for a long time.
Adjustable-rate mortgages (ARMs)
An adjustable-rate mortagge — otherwise known as an ARM — can offer lower initial interest rates compared to fixed-rate mortgages, but you can expect it to change over the loan term. These lower rates are fixed for a certain period before they can adjust based on market conditions.
An ARM could be a good option if you plan to sell your home or refinance before the initial fixed period ends, which is usually 5 years or less. But it’s really important to think carefully about how potential mortgage rate adjustments could affect your monthly payments before you decide to go for an ARM. You could get stuck with a mortgage payment higher than you have budget for after that initial period is up!
Government-backed loans
Government-backed loans such as FHA, VA, and USDA loans are another type of mortgage option that homebuyers can leverage, depending on their circumstances.
These loans are backed by government agencies and often feature lower down payment requirements compared to conventional loans. FHA loans are popular for first-time homebuyers since they require a lower down payment of around 3.5%. VA loans are designed for eligible veterans, active duty service members, and their spouses, offering competitive interest rates and no down payment requirement. USDA loans, on the other hand, are to encourage people to buy at rural homebuyers who meet income and property location eligibility criteria.
Since these programs come with different requirements and eligibility, you should work closely with a mortgage broker at Penn Street Mortgage to see how you can use one of these programs.
Will I Need to Get Private Mortgage Insurance (PMI)?
You may have heard that it’s recommended to offer a 20% down payment when buying a home. The biggest reason for this is to avoid something called private mortgage insurance.
PMI is basically an insurance that’s usually required when you put down less than 20% on a conventional home loan and protects the lender in case you can’t make your mortgage payments.
When you’re getting a mortgage, make sure to ask your lender about PMI and how much it will cost you so you can factor it into your overall budget and determine how much of a down payment to save up for.
You should also find out if there are ways to avoid PMI, like making a bigger down payment or checking out different mortgage options.
How Long Does the Mortgage Process Take?
Kind of like any big process, the time it takes to get through the mortgage process can vary! The general time frame is based on several factors, including how fast the lender works, if your loan is complex or if you’re purchasing a new build or existing home.
It’s important to understand up front how long the mortgage preapproval and application process will take so you can prepare accordingly and make sure you’re full prepared to help move the process along.
Work with Penn Street Mortgage
Wondering how to find a good mortgage lender? We’re here to help. Our team can help you explore all your mortgage loan options and ensure you get the best rate. By reviewing several quotes, you can get peace of mind that you’re getting the best mortgage rate.
Ready to get started? Reach out to us to get your questions answered!