Answering the Most Common Mortgage Questions
Do you have questions about buying a house? We’d be surprised if you didn’t! Becoming a homeowner is an exciting milestone for many, but between knowing how much “house” you can afford and what all of the financial terms mean, buying a home can be overwhelming. Luckily, we’ve rounded up six of the most commonly asked questions when it comes to mortgages, and what you can expect when you work with Valley on your mortgage loan!
- How Do I Qualify?
Many prospective homebuyers will find a real estate agent they feel comfortable with before finding a lender. Conversely, others visit with a lender first before finding an agent. While there’s no right or wrong way to start the process, you’ll need to visit with a lender early on regardless. When you work with a Valley lender, we’ll ask for information about your finances to help us determine the proper loan type and amount for your situation. This includes information about your place of employment, your household income, your current debt and current assets, and how much of a down payment you’re able to make. Once we have all of the information we need, we’ll help you get preapproved.
- Is There a Difference Between Prequalified and Preapproved?
We’re glad you asked— there is! Talking with your Valley lender about your down payment and your income will get you prequalified, as this is just an estimate of what you’ll be able to borrow. But, having your lender actually verify your income and submit your loan request results in a preapproval, which will tell you exactly what you’re eligible to borrow. Overall, a preapproval takes a little extra time, but carries more weight than a prequalification when you’re ready to make an offer.
- What If I Don’t Have a Good Credit Score/Any Credit?
Valley will work with you to find the best solution for your situation. However, additional paperwork may be required and the loan process may take longer. Because each person’s situation is unique, we encourage you to reach out to your local branch to speak with a loan officer.
- How Much “House” Can I Afford?
The amount you can borrow depends on the answers you provide your lender with in Question #1. Generally, it’s a good rule of thumb to keep your monthly mortgage payment to 25% or less of your monthly take-home pay. Buying “too much house” can set you back, and quickly turn your asset into a liability if your payments are more than you can reasonably afford. Additionally, Valley offers a 1st Time Home Buyers Program, in which our loan officers can help you purchase a home with a higher value, provided you meet the qualifications.
- What is Earnest Money?
Think of earnest money as a security deposit. It lets the seller know that you’re serious about the offer you’ve made on their home. The earnest money is given to your realtor or broker, and is then kept in escrow (a secure holding account where important items are kept safe until a transaction is closed) until the purchase is finalized and you become the new homeowner, at which time it is then put towards either your down payment or the closing costs. Typical earnest money deposits range from $500-$2,000. Visit our blog post to learn more about other costs associated with homeownership!
- Do I Really Need a Down Payment?
Buying a home without a down payment may be possible, but risky. Typically, you won’t be able to finance as much, so you may be left with higher monthly payments, and won’t already have any built-in equity when you move in. You’ll also be required to pay private mortgage insurance (PMI). PMI protects your mortgage lender in the event you default on your loan, and you can expect to pay these premiums until you own 20% of your home. Costs range between 0.5% and 1% of the entire loan amount on an annual basis. If you’re able to, we advise that you save at least 10% down on a home.
Buying a house is a large financial commitment and a big decision, whether it’s your first home or your forever home. Our loan officers are friendly, knowledgeable, and take a personalized approach with every homebuyer they work with. Ready to start the process? Easily apply online or call your local branch to speak with a loan officer today!