Since buyers often contact an agent long before they’re ready to meet with a lender, it’s essential that agents are prepared to answer their buyers’ basic questions about obtaining a mortgage. The question is how well prepared are you to answer them?
How much can I afford to borrow?
Agents should avoid giving a specific answer to this question since the buyer’s ability to purchase depends upon their income, credit score, debt-to-income ratio and down payment amount.
You can, however, explain the basic guidelines that lenders use. Specifically, the monthly mortgage payment should not exceed 28 percent of the buyer’s gross income. Second, the buyer’s total debt payments should not exceed 36 percent of the buyer’s gross income.
What are the most common types of mortgages?
Government-backed loans
Fixed-rate mortgages
Adjustable-rate mortgages (ARMs)
Home equity loans (HELOCs)
Interest-only loans
Jumbo loans
What are the interest rates for home mortgages?
Interest rates vary due to a wide variety of factors including the type of mortgage, the length (term) of the loan, the borrower’s credit score, as well as market conditions including the indices to which the various types of loans are based.
What are the closing costs and fees associated with getting a mortgage?
Closing costs are the fees and expenses associated with finalizing a mortgage, including loan origination fees, appraisals, fees, title insurance, and escrow fees. They vary based upon the type of loan and the lender. As a rule of thumb, three percent of the loan amount is often a good estimate of the amount of closing costs.
Due to all the regulations governing closing costs and their disclosure, i.e., TRID, TILA-RESPA integrated disclosures, NEVER provide a detailed estimate of closing costs.
What is the difference between pre-qualification and pre-approval for a mortgage?
According to the CFPB, the prequalification letter is:
A document from a lender stating that the lender is tentatively willing to lend the borrower up to a certain amount. This document is based upon a certain assumptions and is not a guaranteed loan offer.
Rather than settling for a prequalification letter, buyers should always obtain preapproval if possible.
Preapproval is as close as you can get to confirming your creditworthiness without having a purchase contract in place. You will complete a mortgage application and the lender will verify the information you provide. They’ll also perform a credit check. If you’re preapproved, you’ll receive a preapproval letter, which is an offer (but not a commitment) to lend you a specific amount, good for 90 days.
How does the mortgage application process work?
The mortgage application process consists of several steps: prequalification, preapproval, loan application submission, underwriting, appraisal, title search and closing. Each step involves the collection and verification of various documents and information, culminating in the final loan approval and property purchase.
What happens after I get approved for a mortgage?
After being approved for a mortgage, you’ll receive a loan commitment letter outlining the terms and conditions of the loan. You’ll then proceed to the closing process, which involves signing the loan documents, transferring funds, and ultimately acquiring the property title.
In escrow states, the buyers sign their loan documents usually a day or two before the scheduled closing date. After all required documents are signed and the buyer’s down payment and other closing costs are deposited as a cashier’s check or wired to the title company, the property typically closes the next business day. In other states, the title company handles both the escrow and title function.
What are the common mistakes to avoid when getting a mortgage?
Some of the most common mistakes buyers make when obtaining a mortgage include: - Not shopping for the best interest rate.
- Failure to reach out to a mortgage professional to determine exactly how much they can qualify for and whether they are eligible for down payment assistance.
- Not knowing that closing costs are on top of the down payment amount.
- If interest rates are rising, failure to lock in their interest rate for 60 to 90 days when they first apply for a loan.
- Choosing the wrong type of mortgage for their situation.
- Settling for prequalification rather than doing the extra work to obtain preapproval.
- Lack of understanding about how credit scores impact the buyer’s interest rate and their ability to qualify for a loan.
- Making unnecessary purchases while they’re under contract. This can include buying furniture or other items for their new home which can negatively impact their debt ratios and cause them not to qualify for their loan.
Call us at (480) 205 2234 to answer more such questions from your buyer and also to assist them with their mortgage needs. | 
