At Spec Home Loans, we know that buying your first home or refinancing your existing mortgage is a huge financial decision, and that the process can seem daunting. Our goal is to to guide you through the loan process with complete transparency and remove any potential roadblocks by tailoring your mortgage based on your specific needs. While every consumer and situation is different, we have provided answers to some common questions about purchasing and refinancing below.
Please know that our team is available to answer questions anytime. You can reach one of our experienced loan officers at (714) 745-8947 or via email at firstname.lastname@example.org. We look forward to working with you!
PURCHASING A HOME
What is the first step in the home buying process?
Before you begin your home search, it is beneficial to have an idea of what you can afford. There are two processes to help you get started: The pre-qualification and the pre-approval. Completing both the pre-qualification and pre-approval are important for you and for the potential seller you will be working with.
Pre-qualification is a quick procedure that involves providing a bank or lender with basic financial information such as your income, assets and debt. With this info, a lender can give you a preliminary assessment of the mortgage amount you might qualify for, as well as explain different options, and recommend the best mortgage based on your specific needs and situation. Because pre-qualification does not involve pulling your credit or taking a more in-depth look at your ability to purchase a home, the next step is to get pre-approved for a loan.
To get pre-approved, you will need to fill out an official mortgage application and supply the lender with documentation so that they can perform an in-depth check of your current credit score and financial background. This information makes it possible for the lender to give you the specific mortgage amount you are approved for, as well as the potential interest rate for your loan. Depending on the situation, you may be able to lock in a specific rate. Your lender will also provide you with a conditional commitment in writing for an exact loan amount. Having this pre-approval carries more weight because once you find your perfect home, the seller knows you are serious and that your offer won’t be contingent on obtaining financing. Once you find the home you wish to purchase, you need to update the pre-approval with the property details, and your pre-approval will become a complete application.
Why should you consider completing a pre-qualification and a pre-approval? In a competitive real estate market, being both pre-qualified and pre-approved saves valuable time and gives you the upper hand to help you get into your dream home faster. The pre-qualification gives you an idea of how much home you can afford, while getting a pre-approval shows a seller that you are a credible buyer amidst all other offers.
What is a mortgage?
A mortgage is a loan provided by a mortgage lender or bank that helps finance the purchase of a house. A mortgage payment is composed of four parts: Principal (total amount of money borrowed to purchase the home), Interest (the price you pay to borrow money from your lender), Taxes (property taxes you pay as a homeowner, calculated based upon the value of your house) and Insurance (includes homeowners insurance and other applicable coverage such as flood or fire insurance depending on the property). It is normally paid on a monthly basis.
What documents will I need to secure a mortgage?
The entire list of documents can vary depending on your loan type, but the most common are:
- Your Social Security number
- Date of Birth
- Pay stubs (the last two months)
- W-2 forms (past two years)
- Bank statements for the past two or three months
- One to two years of federal tax returns
- Information on current debt, including car loans, student loans and credit cards
Is a fixed or adjustable interest rate better?
A fixed-rate mortgage makes sense if you plan to stay in your home for a long period of time. With a fixed-rate mortgage, your payments are predictable and have long-term protection against rising mortgage interest rates. An adjustable-rate mortgage (ARM) makes sense if you plan to stay in your home for seven years or less. However, it is important to keep in mind that if your mortgage has an adjustable rate, your monthly payments have the potential to go up each time your interest rate adjusts.
What other fees are there, besides the down payment?
At Spec Home Loans, we believe that transparency is key. Your loan originator will help you determine how much you can expect to pay towards loan origination and closing costs, based on the type of loan you receive. These fees will be presented to you at the beginning and the end of the process so there are no surprises.
Are there any special homebuying programs that I can take advantage of?
Yes. The main programs are Veterans Affairs or VA, USDA, and FHA loans. The team at Spec Home Loans will work with you to determine which is right for you.
How long does it take to buy a home?
The timeline for buying a home varies from person to person, but usually, once you find a home and an offer is accepted, it will take 30 days to close. At Spec Home Loans, our team works hard to make the process as smooth and quick as possible.
What are the benefits of refinancing?
Refinancing can be beneficial if you are looking to lower your monthly mortgage payment, pay off high interest rate debt, or shorten the length of your repayment term.
When should I consider refinancing?
There are a few different times to consider refinancing. 1) You have a mortgage at a rate above the current market rates; 2) You need to access cash and have equity in your property; 3) You’ve been making payments on your original 30 year mortgage for less than 10 years; 4) You would like to avoid financial risk by changing your adjustable rate to a fixed rate for a longer period of time; or 5) Your home has significantly appreciated in value.
Do I need an appraisal in order to refinance my mortgage?
In most cases, yes. However, some circumstances do not require an appraisal. The Spec Home Loans Team will help determine if an appraisal is necessary for your refi.