Top Buyer Questions
January 24, 2025 | Posted by: Sherry Corbitt
Being a first-time home buyer can be overwhelming, especially when you have questions about your first purchase. With how the market has changed within the past few years, it may even be more confusing for some. Considering and answering some of the most frequently asked questions will hopefully put you at ease as you start your home buying process.
What is a Lender Commitment?
When your mortgage broker sends your deal to the lender, they have to wait for approval on your loan. The lender’s commitment package is the lender’s approval of your mortgage. The commitment will include the details of your mortgage, such as the loan information, the term outline, and your payment amount and schedule. In addition, the commitment will go into further detail about the lender’s terms and conditions for what needs to be satisfied for the deal to close. The signed commitment will be one of the first items you will sign during your mortgage process.
What is Mortgage Life Insurance?
Typically added at the end of the commitment, there will be an option for mortgage life insurance. This is optional for you as the buyer, whether or not you want to sign up for it. The primary purpose of mortgage life insurance is that if you pass away unexpectedly, the lender will pay down the mortgage. This is a beneficial insurance type since it assists in not burdening your family with the remainder of your mortgage sum. Of course, as noted previously, mortgage life insurance is optional when going through the mortgage process. Yet if you do happen to change your mind and want to apply for it, you can speak with your broker and get signed up.
Do I Need a Lawyer?
For many, having a lawyer may seem unnecessary in the mortgage process. Yet your lawyer is essential in ensuring your mortgage is authorized properly. During your mortgage process, your lawyer will have some conditions to satisfy for the lender. These conditions typically include making sure your taxes are up to date, reviewing purchase agreements and title documents, and providing a legal description of the property. Then, between 2-7 days before the mortgage, you will meet with the lawyer to pay off any debts and sign to finalize the mortgage. A lawyer will undoubtedly be worth it, especially ensuring that your mortgage is legalized and down in writing.
How Much Should I Save For Down Payment
This question will vary depending on what type of mortgage you want. There are two main lenders to get a mortgage from prime and alternative lenders. Prime lenders offer and approve mortgages to those with relatively high credit scores and history. Meanwhile, alternative lenders are for those who do not meet the requirements of prime lenders. Most prime lenders require 20% of the mortgage amount for your down payment. You can put down below 20% for alternative lenders, the lowest of 5%. Before determining how much you need for your mortgage, you should analyze the lending category you want or will fit into. At this point, you can choose a rough estimate based on the approximate range of houses you are planning on purchasing.
How Much Should I Expect With Closing Costs
Your closing costs will vary depending on what mortgage and the amount you get. For a regular purchase, there will usually be a lender cost and broker cost. As a rule of thumb, a lender fee will typically be 1% of the mortgage amount. The broker fee could range, primarily if you were referred to your broker. Other costs can include the appraisal, which can range between $350 and $900. The further located your house is from the appraiser, and the type of appraisal you require can alter how much it will cost. Closing costs can be overlooked, especially for first-time home buyers. Knowing about these closing costs will prepare you for a smooth mortgage purchase.
How Long is the Mortgage Process
The mortgage process timeline will range from when you first get approved to when you close and sign with the lawyer. This question cannot be firmly answered since the process will be different for every home buyer. If you know exactly what mortgage you want and have all your documentation prepared, you can get a closing date within 2-3 weeks. If you are a bit unsure of what mortgage you want and still require to get documentation for your broker, then your mortgage process may be anywhere from 3-8 weeks. Having enough time for your lender to review and satisfy documents is crucial to a smooth closing.
These are a handful of the most commonly asked questions from home buyers. Knowing the answers to these questions can help alleviate your concerns when starting the mortgage process and make it less stressful. Please reach out to me if you have any questions, I am always here to help with your mortgage needs!
Your Broker for Life,
Sherry Corbitt
Sources:
Eat Sleep Wander (2022). 46 Questions to Ask a Realtor in 2022 (The More the Merrier). Retrieved from https://eatsleepwander.com/questions-to-ask-a-realtor/
