We work with a lot of first time home buyers and there one thing we have learned about them: they have a LOT of questions about mortgages! We took these basic mortgage questions to our friend and preferred vendor, Matt Chojnacki of Academy Mortgage, and had him give us some very simple and to the point answers to help get you headed in the direction.
When Should I Talk to a Loan Officer?
The earlier in the process the better. A mortgage pre-approval should always be the first step in the home buying process.
How Long Does the Mortgage Process Take?
30 to 45 days from application to closing. It can vary though, depending on the type of mortgage.
How Much Does it Cost to Buy a House (minus the cost of the house)?
There are 4 components that make up the funds you will need to bring to closing:
- Down Payment
- Up to one year of property taxes
- The Homeowners Insurance premium for the 1st year
- Mortgage closing costs
The taxes and insurance will vary based on the property but the mortgage closing costs will usually run between $2,000.00 and $2,500.00 unless the borrower is paying discount points to lower the rate, in which case the costs would be more.
What's the Difference Between All the Loan Types?
There are 5 basic types of first mortgages. Here are the basics:
- Conventional: offers down payments as low as 3% with a max loan amount of $417,000 (this is going up in 2017)
- FHA: offers down payments as low as 3.5% with a max loan amount of $271,050
- VA: offers 100% financing for active and former members of the military
- USDA Rural Development: Offers 100% financing in rural areas. This program has income limits based on the number of people in the household
- Jumbo Loans: Have a minimum loan amount of $417,000 and require at least 10% down
Do I Have to Have a Down Payment?
It depends on the type of mortgage program you choose. With Conventional and Jumbo yes, you will need a down payment. FHA also typically requires a down payment but qualifying borrowers can get down payment assistance from MSHDA. VA and USDA mortgage programs do not require a down payment.
What's PMI? Do I Have to Pay It?
Also known as MI or Mortgage Insurance. This insures the lender in case the borrower defaults on the mortgage. It is requires on conventional loans if you put less than 20% down. It is also required on FHA and USDA loans. The cost of the MI will vary based on the loan product and the down payment.
What Documents Will My Loan Officer Need?
For W2 employees we will need their last two years W2’s, Two recent pay stubs, Two recent bank statements and a copy of their driver’s license. If they are self-employed we will also need personal and business tax returns for the previous two years. There will most likely be more information required along the way but this is a good starting point.
How Do I Know How Much I Can Afford?
The first step in the home buying process should be to get pre-approved for a mortgage. This way you know exactly what you will qualify for. It is free to do and can usually be done over the phone.
When Will I Pay For My Appraisal?
Usually at the time we order it - after the borrower has signed the application. This is usually the only mortgage related expense for the borrower prior to the closing.
If you have ANY questions about getting pre-approved, different types of mortgages, mortgage rates or any mortgage related info, please give Matt Chojnacki at Academy Mortgage a call! He is incredibly knowledgeable, super friendly and not at all pushy. (248) 895-2062 Matthew.Chojnacki@AcademyMortgage.com