Frequently Asked Real Estate Questions

What is an Adjustable-rate mortgage (ARM)?

After an introductory period that could be 3, 5, 7, or 10 years, the interest rate on an adjustable-rate mortgage will be adjusted by the lender in accordance with current interest rates and your loan agreement.

For instance, a 5/1 ARM will have a fixed rate for the first five years, then the rate will vary based on a variety of factors. Your lender will explain the details before you accept the loan.

Typically, the interest rate on ARMs are lower for the fixed period which makes your payments more affordable during that period. However, the interest rate will generally go up along with your monthly payment after the rate is adjusted.

Homeowners consider ARMs riskier as you can’t predict what mortgage rates will be in the future.

What is a conforming loan?

A conforming loan is one that is limited to $647,200 for most of the U.S., which means you may be able to avoid the stricter requirements of a jumbo loan.

Loan limits vary over time and by location so you should check with your lender or Realtor for the latest information.

Other loan types include jumbo loans, FHA, and VA.

A number ranging from 300-850 that’s based on an analysis of your credit history.

Your credit score helps lenders determine the likelihood you’ll repay future debts.

You’ll need a score of 620 or better, but you’ll get better financing rates with a score of 720 or higher.

What is a fixed-rate mortgage?

This mortgage’s interest rate will never change, even if the term of the loan is 30 years.

Fixed-rate mortgages typically have a term of 15 or 30 years.

Homeowners prefer this type of loan as it has a lower amount of risk compared to variable-rate loans, and the monthly payment remains the same for the life of the loan.

What is a Jumbo Loan?

Conforming loan limits are $647,200 for most of the U.S., so anything above this would be a jumbo loan.

Jumbo loan requirements are stricter and there are more requirements you will need to satisfy.

Find out more about jumbo loans here.

The interest rate on a mortgage loan you pay to borrow that money when buying a home.

The lower the rate, the better.

What is a Pre-Approval Letter?

It is a letter from a lender indicating you qualify for a mortgage of a specific amount.

Getting Pre-Approved

You’ll fill out a mortgage application, provide documents, and bank statements, get a copy of your credit report, etc.

Getting pre-approved is what you need to do before starting a home search. The person selling your dream home will want to make sure you really are qualified to buy. Most sellers aren’t willing to accept your offer with only a pre-qualification.

What is getting Pre-Qualified?

You contact a lender, provide a bit of financial information to them, and they tell you about how much you can afford to buy. That’s about it. It’s usually done over the phone, and your credit report is not needed at this point.

WARNING! 🔥 It’s NOT a promise of a loan. You are not guaranteed any particular interest rate. And you are not ready to purchase a home. What you have is an idea of what you may be able to buy. It’s a starting point, and a good way to start planning.

You’ll want to get a Pre-Approval Letter from your lender before you start shopping for a home.

One of the first steps in purchasing a home is getting either pre-approved or pre-qualified for a mortgage. Unless of course, you’re buying with all cash. 😁

It’s very easy to get confused between the two things. So, should you get Pre-Qualified or Pre-Approved for a mortgage loan?

Without getting into too much detail, we’ll give you just the essentials in understanding the difference, not the complete procedure for each.

Pre-Qualified

This is the simpler of the 2 processes. You contact a lender, provide a bit of financial information to them, and they tell you about how much you can afford to buy. That’s about it. It’s usually done over the phone, and your credit report is not needed at this point.

WARNING! 🔥 It’s NOT a promise of a loan. You are not guaranteed any particular interest rate. And you are not ready to purchase a home. What you have is an idea of what you may be able to buy. It’s a starting point, and a good way to start planning.

Check out Investopedia for a more in-depth explanation if you’re curious. https://www.investopedia.com/articles/basics/07/prequalified-approved.asp

Pre-Approved

This one is where the rubber meets the road. Paperwork, and plenty of it. You’ll fill out a mortgage application, provide documents, bank statements, get a copy of your credit report, etc.

It takes more time and there are more questions. It’s best to start with plenty of time before you plan to start looking for a home. That way you can deal with finding the papers you thought were in that one file cabinet, get your updated investment info, and try to fix any credit issues you may have.

Getting pre-approved is what you need to do before starting a home search. The person selling your dream home will want to make sure you really are qualified to buy. Most sellers aren’t willing to accept your offer with only a pre-qualification.

Again find out more here. https://www.investopedia.com/articles/basics/07/prequalified-approved.asp

Conclusion

Save yourself some heartache, heartbreak, and hair-tearing-out. Get pre-approved before shopping for homes.

Better yet, call me, Libby Guthrie at 925-628-2436 and I’ll answer your questions about getting started, and if you like, I’ll connect you with the right lender for your situation.

Just so you know, before my 27 years as a real estate agent and broker, I spent 15 years in mortgage banking. I know what I’m talking about and I love to share my expertise with you and your family.

Contact me today, share this article with a friend, and please, share on your favorite social site. Thanks!

What is a Reverse Mortgage?

A financial agreement in which a homeowner relinquishes equity in their home in exchange for regular payments, typically to supplement retirement income. This type of loan is for seniors ages 62 and older.

Should you get a reverse mortgage?

While it can be a great way to supplement your retirement income, there are some things to watch out for:

⚠️ High fees
To get and finalize your reverse mortgage, you’ll be paying a range of fees that can add up quickly.

⚠️ Variable or high-interest rate
The interest rate is often higher than that of a standard mortgage. It may also be variable, rather than fixed, which means it can increase in the future.

⚠️ Less money for your heirs
The remaining amount of your estate will need to be repaid when you’re no longer here, usually in a specific period of time, which can be costly and stressful for your family.

This is why, in some cases, downsizing can be a better option. If you’re deciding between the two, contact us to discuss your options and make the best choice for your needs.

Here are 5 typical questions asked by homebuyers about getting their first mortgage loan.

How much do I need to save up for a down payment?

A conventional loan down payment is usually 20% of the sales price, but other types of financing require as little as 3.5% to 15%. A mortgage lender can tell you what types of loans you qualify for.

How do I know if I qualify for a loan and how much I can afford?

Contact a mortgage lender to get pre-approval for a loan. The lender will ask you some basic questions about your income and debts and can tell you what amount you can be approved for, and how much your mortgage payments will be. Ask me for my lender recommendations!

What does the lender need from me to give me a loan?

Usually, you are asked to provide your last two tax returns to show proof of income. You should also provide recent bank and credit card statements and proof of your current pay rate. You will also be asked for your social security number so they can run a credit check.

The lender may want to meet with you before asking for this documentation, or they may provide you with a list of which documents you need on your first appointment.

What’s the difference between pre-approved and pre-qualified?

While often used interchangeably, these terms don’t mean the same thing. Pre-qualification is an estimate of what you may be approved for based only on the verbal information you provide. Pre-approval means the lender has verified your income and debt information and run a credit check.

Also, read “Pre-Qualified vs Pre-Approved” for more details about the difference between pre-approved and pre-qualified.

How do I know which mortgage option is right for me?

Your mortgage lender is the best person to advise you on this question. Their products and qualifications change from time to time, so they would know best what products are available to meet your needs.

That said, you can always ask me, if you want a second opinion. I began my career in real estate as a mortgage lender.