A housing purchase is often the largest financial transaction a person makes in their life. Dealing with a bank can be complicated. You should ask these questions before buying a home.
Some people get intimidated by their mortgage broker. After all, you’re borrowing a small fortune from them. But it’s a two-way street. While they’re checking you meet their borrower criteria, you should interview them.
Remember, the financial figures and conditions of the mortgage will have a lasting impact on your finances for many years to come. Be sure that the bank is up to your standards.
What documents are required?
When the seller accepts your bid, a frantic race starts. The underwriting department of the bank must verify all your financials. Sometimes other people like your accountant are involved. There is usually some type of deadline in the sales agreement. If it’s not met, the seller could cancel the deal or ask for more money.
It’s important to have these documents on hand so that they can easily be submitted to the bank. The last thing you want is a search for a lost file.
ID
This should be a government-issued photo ID. A driver’s license and a passport are good.
Income verification
Your W2 forms and federal tax return are good. Some banks might require paystubs. If you don’t have any, you can usually print them online from your employer’s HR system.
Reserves
Banks will require you to have some reserves. This usually means bank and brokerage account statements.
Miscellaneous
Some situations might require additional documents.
For example, if you had someone contribute to your down payment, the bank will need a gift letter. Sometimes you need to give your landlord contact info.
What type of loan is good for me?
There is a wide variety of mortgages available. A good mortgage broker will let you know of the various types. If you want to limit your downpayment, an FHA loan is good. If you have connections to the military, the VA mortgage is an excellent option.
Will there be an origination fee? What other types of fees will there be?
An origination fee is an upfront bank charge for processing a new loan. It’s typically around 0.5 – 1%. Additional fees can add up to thousands of dollars. Some of them are negotiable. Shop around if you feel the fees are too high.
Is There any Specialized Program For Me?
There are over 2,500 programs available. They all have stipulations. Some might be available only in certain areas while others might have income limits. Still, they might have a lower down payment or a lower interest rate. A good broker will guide you in the right direction.
What Is My Interest Rate? What Will My Payment Be?
These are perhaps the most important questions. Be sure to shop around for the rate. A few hours could save you a great deal of money on a mortgage.
While your mortgage payment is probably less than what you’re paying for rent, remember that you’ll have to buy the insurance and pay taxes as well.
Dealing with a bank is a complicated matter. Before you purchase a home, select the right one for you.
