With fixed residential mortgage rates stabilizing, it’s time to look at the other factors that go into shopping for and financing a new home. Before you set foot in a home for sale, get pre-approved for a specific mortgage amount and know what you must provide in cash or contributed credits toward closing costs.
Tropical Financial Credit Union can help with a purchase. From today through June 30, it will contribute up to $1,000 toward closing costs.
Here’s what to ask a TFCU mortgage loan officer when discussing loan terms and conditions:
What documentation is needed for pre-approval? Lenders typically want proof of income, such as a tax return if you are self-employed, and income from your job and investments such as rental property.
Which credit score qualifies for the best mortgage rate? Generally, the higher the number, the better the loan terms. Using the FICO model, whose range is 300 to 850, 800 or more is best, 740-799 is very good, 670-739 is good, and 580 and below is fair to poor.
Where are mortgage rates headed? Rates can change daily based on economic expectations. The best guide is the Freddie Mac index published every Thursday. On May 1, the 30-year fixed rate was 6.76%, about midway between a high of 6.85% and a low of 6.62% over the previous three months.
How many points are paid on the quoted rate? One point equals 1% of the loan amount. Roughly speaking, each extra point paid lowers the rate by one quarter of 1%. Negotiate with the seller to contribute points toward your loan to help the sale go through.
How many days does it take for an appraisal and lender-required inspections to be completed? Your insurer may separately demand property checks, such as the roof’s condition. Conditional approval typically occurs during the pre-approval stage, and final approval takes place after the seller accepts your offer in writing.
Now that you know how much home you can afford, it’s time to work with a licensed real estate agent to find a residence that fits your needs and budget. Be prepared to answer these questions:
Is your loan rate fixed or adjustable? There’s security knowing you will pay the same amount monthly no matter how high rates rise after you close on your home. On the other hand, adjustable-rate mortgages usually have a lower starting rate that’s fixed for five to seven years.
Are you eligible for a VA loan? The program for veterans requires no down payment, no private mortgage insurance, and possibly lower interest rates and closing costs than conventional mortgages.
For how long is the quoted mortgage rate guaranteed? Lenders typically lock in rates for 60-90 days. The longer that period, the less pressure you face to come to terms with a seller.
For more information on mortgage pre-approval and financing a new home, visit Tropical Financial’s KOFE homebuying guide and resources for homebuyers.