Questions Every Borrower Should Ask When Qualifying for a Mortgage

When you’re qualifying for a mortgage, everything seems important. How do you know what’s worth your time and attention? You’re in luck, because we’ve got answers to some of the most important questions people ask when they’re in the process of qualifying for a mortgage.

Do I really need a 20% down payment?

The short answer is no. At one time, 20% down was the requirement for most, if not all, loan products. But today, that’s closer to 3–5%. Rarely do borrowers put down 20%, but if you’re able, it’s not a bad idea. That’s because if you put down 20%, you won’t need to take out mortgage insurance. So while it’s not a requirement (and that’s good news for home buyers) there is a benefit to putting down the 20% if you have it.

Here’s something to keep in mind, though: down payment isn’t everything. Even though it gets a lot of attention, it’s only part of the mortgage equation. There are so many other factors that contribute to what you’ll pay up front and over the life of your loan, like interest rate, fees, closing costs, the length of your loan term, and more.

How important is my interest rate?

Like I said, the interest rate is another factor that contributes to the overall cost to buy. But is it everything? When it comes to qualifying for a mortgage, it seems like all people talk about (aside from down payment) is interest rates. And for good reason, because your interest rate is a major player in how much you pay. However, if you’re looking to make home buying more affordable, there are other ways to do it.

First, you should know your loan’s APR—annual percentage rate. That’s the total cost to borrow expressed as a percentage and it gives you the full picture of buying so you can compare loans as you shop. To make home buying more affordable, you could ask what fees are associated with your mortgage. Some may be eligible to be waived depending on the loan program or promotion. You could also consider paying points on your mortgage to save money over the life of your loan. Lastly, even if you don’t get the rate you’d like now, you can always refinance later for a lower rate or shorter term.

Can I get today’s rate even if I haven’t found the right house?

With interest rates on the rise, and the housing market as competitive as it has been, you might be wondering if you can hold onto the current interest rate while you shop. We thought about this, that’s why we came up with Rate Protect—our promise to let you lock today’s low rate while you house hunt. Rates won’t wait for you to find the perfect home. So, if house hunting is taking longer than you expected, talk to one of our loan originators about Rate Protect.

Rates won’t wait for you to find the perfect home. So if you love it, lock it with Rate Protect.

Is there anything I can do to increase my credit score?

It goes without saying, but I’ll say it anyway: your credit score plays an important part in qualifying for a mortgage. It’s a snapshot of your credit history expressed as a number, and it’s important because it tells your lender if you have a history of paying off debt. And, to put it plainly, you’re not likely to get a mortgage without demonstrating an ability to repay.

Take a deep breath, because there’s good news. Far too many people stress out over their credit score and shouldn’t because there is actually a lot you can do to increase it. If you’re worried about speaking with a loan originator just to find out your credit’s not up to snuff, that’s OK because they will tell you there are practical ways you can take control and improve it.

We can’t tell you how to live your life, but there are some choices you can make that could negatively impact your mortgage approval. For example, try to avoid opening any new financial accounts or credit cards, changing jobs, or making any large purchases (e.g., furniture), but be sure to pay down debt wherever you can. Following these tips during the mortgage process can have a positive effect on your credit score.

Are pre-qualification and pre-approval the same thing?

Again, the short answer is no. But if you’re looking for the long answer, here goes. Pre-qualification is a short, informal process in which a loan originator will ask you a few basic questions and then come up with an estimated loan amount you could be approved for. All you’re really doing is getting the conversation started with your lender and having a high-level discussion about your finances and intentions to buy a house.

Pre-approval, on the other hand, is more official. When you get pre-approved for a mortgage, we’ll check your credit, conduct a detailed review of your finances, and factor in your employment history. The end result is a certified pre-approval letter that states how much home you can afford. When you’re qualifying for a mortgage, the pre-approval is like your golden ticket. It takes a little more time and effort than getting pre-qualified, but it carries a lot more weight. With a pre-approval in hand, you prove to sellers that you’re a serious buyer, and you have a better chance of winning the bidding war.

Is there anything I can do to speed up the process?

Yes! A common misconception is that your lender takes care of everything and you just sit back and wait. That’s only partly true. A more accurate way to look at the mortgage process is like a volley. We work together to get you to the closing table. While the time it takes to underwrite your loan varies, gathering and sending your pay stubs, bank statements, tax documents, etc., ahead of time goes a long way in speeding up the process. Don’t worry, your loan originator will tell you everything you need to do or submit up front so that you’re set up for success.

But that’s not all. When you take out a mortgage with us, you get 24/7 access to our home loan platform, Octane. Octane lets you see your loan’s details and status updates in real time so you always know where you are in the process and what you need to do to keep things moving.

What’s a good way to keep tabs on the housing market?

The market is hot right now, but it changes on a daily basis. And there’s so much information it’s impossible to know what to care about if you don’t live and breathe mortgages. Well, good thing we do. That’s why we started a newsletter—to make it easy for everyday people to know what’s going on in the housing market. Subscribe today and get only the most important information about housing and mortgages. It’ll be the easiest thing you do all day!

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