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<\/figure>\n\n\n\nBefore your buyers even begin the process of house hunting, let alone deciding on a mortgage, they\u2019re probably going to create a budget that determines how much they can spend on a new home. To do so, they\u2019ll need to consider a number of factors, including their:<\/p>\n\n\n\n
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- Income<\/li>\n\n\n\n
- Debt<\/li>\n\n\n\n
- Recurring expenses<\/li>\n\n\n\n
- Cash reserves<\/li>\n\n\n\n
- Credit profile<\/li>\n\n\n\n
- Down payment amount<\/li>\n\n\n\n
- Comfort level (just because they can<\/em> afford it doesn\u2019t mean they feel comfortable spending it!)<\/li>\n<\/ul>\n\n\n\n
It\u2019s also helpful to know the loan term your client is considering, the current average mortgage rate for that term, and any additional homeownership costs (e.g., property taxes, insurance, Homeowners Association (HOA) fees, etc.). Of course, buyers may not know all of that information up front, but any details and estimates they have will help contribute to a more accurate number.<\/p>\n\n\n\n
There are several online mortgage calculators available, like these from Fannie Mae\u00ae<\/a> and NerdWallet<\/a>, but the best source of information will usually be a lender<\/a>.<\/p>\n\n\n\n
How does my credit score impact my mortgage?<\/h2>\n\n\n\n
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<\/figure>\n\n\n\nBecause a mortgage is a long-term commitment, lenders want reassurance that borrowers can manage monthly payments consistently. Credit scores<\/a> are an important part of securing that affirmation. They help establish an individual\u2019s risk level as a borrower, or how likely they are to repay their debts.<\/p>\n\n\n\n
A higher credit score doesn\u2019t just improve approval chances. It can also influence interest rates, down payment requirements, loan type eligibility, and other associated mortgage costs. It\u2019s important to remind clients that even a small difference in their interest rate can add up to thousands of dollars over the life of the loan, which is why a higher credit score can make a measurable impact on their monthly payments. <\/p>\n\n\n\n
What can I do to improve or maintain my credit score?<\/h2>\n\n\n\n
Speaking of credit scores, buyers who are still early on in the house hunting process might be wondering how they can position themselves with the strongest possible number. Clients can take charge of their credit by:<\/p>\n\n\n\n
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- Paying bills on time (or early!)<\/li>\n\n\n\n
- Avoiding new credit applications or accounts until after closing<\/li>\n\n\n\n
- Postponing major purchases until after closing<\/li>\n\n\n\n
- Keeping old accounts open, even if they are paid off<\/li>\n\n\n\n
- Monitoring their credit and quickly reporting any errors<\/li>\n\n\n\n
- Maintaining a credit utilization of under 30%<\/li>\n<\/ul>\n\n\n\n
Remind your homebuyers that good credit doesn\u2019t just happen overnight\u2014it\u2019s the product of consistency and healthy financial habits. That\u2019s why starting early can make all the difference when preparing to buy a home.<\/p>\n\n\n\n
What are the different types of mortgages? <\/h2>\n\n\n\n
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<\/figure>\n\n\n\nBeyond finding their perfect home match, your clients will also need to find the best mortgage option for their needs. If they\u2019re brand-new to buying a home, this may be one of their first mortgage questions. Be sure that they have a solid understanding of the different loan types, including:<\/p>\n\n\n\n
FHA loans<\/h3>\n\n\n\n
Insured by the Federal Housing Administration (FHA), this type of mortgage offers benefits such as a lower down payment (typically 3.5%) and less stringent credit score requirements, making it a popular choice for first-time buyers.<\/p>\n\n\n\n
Conventional loans<\/h3>\n\n\n\n
These mortgages are not obtained under a government insured or guaranteed program. They often require higher credit scores than other loan types, but the advantage of this may be lower interest rates for buyers. Clients with an excellent credit score or who plan to make a large down payment might be a good fit for this loan type.<\/p>\n\n\n\n
VA loans<\/h3>\n\n\n\n
If you have buyers who are active members or veterans of the United States military, they may be eligible for a Veterans Affairs (VA) loan. This mortgage type is backed by the federal government and typically requires little to no down payment, as well as no monthly mortgage insurance.<\/p>\n\n\n\n
USDA loans<\/h3>\n\n\n\n
Low- to moderate-income buyers in eligible rural areas may stand to benefit from this loan guaranteed by the U.S. Department of Agriculture (USDA). USDA financing is often available for borrowers with lower credit scores and, like a VA loan, usually requires little to no down payment.<\/p>\n\n\n\n
What is PMI?<\/h2>\n\n\n\n
Your clients may have heard that they should avoid paying PMI, but they may not be entirely sure what it is. PMI\u2014private mortgage insurance\u2014is a type of insurance that protects lenders against loss if the borrower defaults on their conventional home loan. The cost varies and is usually calculated as a percentage of the loan amount, then is paid on a monthly basis as part of the total mortgage payment.<\/p>\n\n\n\n
To avoid PMI, buyers can put 20% or more down on their conventional loan. They can also request cancelation of PMI<\/a> once their principal balance falls to 80% or less of the home\u2019s original value. Be sure to let buyers know that other types of loans can also have specific mortgage insurance requirements. For instance, FHA loans typically require a mortgage insurance premium, which can consist of an upfront fee and ongoing annual payments.<\/p>\n\n\n\n
How do I choose a lender?<\/h2>\n\n\n\n
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<\/figure>\n\n\n\nChoosing the right mortgage company is a critical step in the homebuying process, so it\u2019s important for your clients to take their time with this decision! Encourage them to conduct thorough research and compare multiple lenders, looking specifically at:<\/p>\n\n\n\n
- \n
- Loan options<\/li>\n\n\n\n
- Specializations<\/li>\n\n\n\n
- Reputation & reviews<\/li>\n\n\n\n
- Special financing & other offers<\/li>\n\n\n\n
- Responsiveness<\/li>\n\n\n\n
- Policies & fees<\/li>\n<\/ul>\n\n\n\n
Personal referrals are also a great way for buyers to identify options, and can come from friends, family, colleagues, neighbors, or their real estate agent (that\u2019s you!).<\/p>\n\n\n\n
If your client is buying new, their builder may have a preferred or affiliated mortgage company. Our affiliate lender, HomeAmerican Mortgage Corporation<\/a>, is well-versed in Richmond American homes and offers a tailored, streamlined financing experience for buyers.<\/p>\n\n\n\n
What are the current interest rates?<\/h2>\n\n\n\n
To find the most current mortgage rates, homebuyers can consult Freddie Mac\u00ae<\/a> for a weekly aggregate or check a site like Bankrate<\/a> or NerdWallet<\/a> for a daily average. Don\u2019t forget to remind your clients that these numbers do not necessarily reflect the exact interest rate they will receive for their loan. That number will depend on their lender, loan type, credit score, financial health, and several other factors.<\/p>\n\n\n\n
How can I find a lower interest rate?<\/h2>\n\n\n\n
Many mortgage companies may have special offers<\/a> that can lower a buyer\u2019s interest rate and monthly payment. With the help of special financing, rate buydowns, closing-cost assistance, and other programs, your clients may be able to afford more than they think! <\/p>\n\n\n\n
Do I need prequalification?<\/h2>\n\n\n\n
While home loan prequalification<\/a> isn\u2019t required to secure a mortgage, it\u2019s a helpful step that could save your buyers time and provide them with an estimate of how much they can borrow for their new home. House hunters often mistake prequalification for preapproval, but the two are distinctly different.<\/p>\n\n\n\n
- \n
- Prequalification <\/strong>is based on self-reported financial information and doesn\u2019t require documentation.<\/li>\n\n\n\n
- Preapproval<\/strong> does involve documentation (such as pay stubs and bank statements) and is often valid for a set number of days, usually 60 to 90.<\/li>\n<\/ul>\n\n\n\n
Because prequalification doesn\u2019t involve any specific financial documents, it may not provide as accurate an estimate as preapproval would; however, it can still be a useful tool for crafting a budget and narrowing down loan types.<\/p>\n\n\n\n
Where can I find more information?<\/h2>\n\n\n\n
Knowledge is power, especially when it comes to something as significant as securing a home loan! If your clients are asking for additional resources, we encourage you to share some of our homebuyer guides<\/a> and blog articles<\/a> with them. Relevant ones include:<\/p>\n\n\n\n
- \n
- Mortgages 101: Financing Basics for First-time Buyers<\/a><\/li>\n\n\n\n
- How to Save for a Down Payment: 4 Tips<\/a><\/li>\n\n\n\n
- VA Loan FAQ for Military Homebuyers (& Military Spouses!)<\/a><\/li>\n\n\n\n
- Why Did My Credit Score Drop: Possible Reasons & Solutions<\/a><\/li>\n\n\n\n
- Mortgage Quick-reference Guide<\/a><\/li>\n\n\n\n
- 8 Credit Score Management Tips<\/a><\/li>\n<\/ul>\n\n\n\n
Finding a home and securing a mortgage doesn\u2019t have to feel confusing or intimidating for your buyers, especially when they have a knowledgeable guide\u2014such as yourself\u2014by their side. By understanding the most common mortgage questions and knowing how to effectively answer them, you can position yourself as not just a real estate agent, but as a trusted partner and advocate as well. Clear guidance on credit scores, loan types, and other important topics can help buyers feel confident through each step of the process.<\/p>\n\n\n\n
\n - How to Save for a Down Payment: 4 Tips<\/a><\/li>\n\n\n\n
- Preapproval<\/strong> does involve documentation (such as pay stubs and bank statements) and is often valid for a set number of days, usually 60 to 90.<\/li>\n<\/ul>\n\n\n\n
- Prequalification <\/strong>is based on self-reported financial information and doesn\u2019t require documentation.<\/li>\n\n\n\n
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