Questions to Ask a Mortgage Lender: A Guide for First-Time Homebuyers 

Buying your first home is an exciting and important milestone, but the process can seem like it’s filled with complicated decisions. To make informed choices, it’s important to ask your mortgage lender the right questions. This guide will help you navigate the process by addressing the top questions to ask a mortgage lender as a first-time homebuyer. 

Questions to Ask When Applying for a Mortgage 

When applying for a mortgage, understanding key details can help you make the homebuying decision that will best serve you and your needs. Use the list of questions outlined here to help guide you on your homebuying journey confidently. 

1. What Types of Loans are Available for First-Time Homebuyers? 

Lenders and mortgage bankers offer a variety of loan products, each designed to meet specific needs. Common loan types include: 

Conventional Loans: 

• Fixed-Rate Mortgages: These loans have a consistent interest rate throughout the loan term, providing predictable monthly payments. 

• Adjustable-Rate Mortgages (ARMs): These loans start with a lower introductory interest rate that adjusts periodically based on market conditions. 

• HomeReady and Home Possible Loans: Designed for low to moderate-income borrowers, HomeReady and Home Possible programs offer down payments as low as 3% and reduced mortgage insurance requirements. 

Government-Backed Loans: 

• FHA Loans: Insured by the Federal Housing Administration, FHA loans are popular among first-time homebuyers due to their more lenient credit requirements and lower down payment options. 

• VA Loans: Available to veterans, active-duty service members, and eligible spouses, VA loans offer benefits such as no required down payment, competitive interest rates, and no monthly mortgage insurance.  

• USDA Loans: Designed for rural property buyers, these loans offer 0% down financing for eligible applicants purchasing in eligible areas. 

Ask your lender whether a conventional loan or government loan best fits your financial situation and long-term goals. 

2. How Do Interest Rates and Annual Percentage Rates (APR) Affect My Mortgage? 

Interest rates directly impact your monthly mortgage payment and the total cost of your loan. The APR gives a more comprehensive view by including fees and other costs in addition to the interest rate. Comparing APRs can help you determine the true cost of your mortgage and find the best option for your budget.

3. What Does My Monthly Mortgage Payment Include?

Your monthly payment typically covers more than the loan principal and interest. It may also include: 

• Property Taxes: Based on the assessed value of your home. 

• Homeowners Insurance: Protects your property against risks. 

• Mortgage Insurance: Required if your down payment is less than 20%. 

Understanding your full payment breakdown will help you budget effectively. Your mortgage banker will be able to provide more insight specific to your location or lending situation. 

4. Are There Any Fees I Should Know About?

It’s vital to remember to ask your lender if there are any other fees that need to be considered. This information will help you avoid unexpected costs in the future.  

5. How Much Do I Need for a Down Payment? Are There Assistance Programs?

The amount you need for a down payment depends on the type of loan you’re applying for. These down payment assistance programs are designed to reduce the financial barrier to homeownership, especially for first-time buyers or those purchasing in specific areas. They can also allow you to preserve your savings for other expenses like moving costs or unexpected home repairs.  

Here’s an overview of common down payment requirements and assistance programs available: 

Down Payment Requirements 

Conventional Loans 

• Minimum down payment: 3% for HomeReady or Home Possible loans (ideal for low- to moderate-income borrowers). 

• Standard conventional loans usually require a 5% or more down payment. 

FHA Loans 

• Minimum down payment: 3.5% of the home’s purchase price. 

VA Loans 

• No down payment required for eligible veterans, active-duty service members, and their families. 

USDA Loans 

• No down payment required for eligible rural property buyers. 

Down Payment Assistance Programs 

Quaint Oak Mortgage partners with several programs to help make homeownership more accessible. Many of these programs are available for limited periods throughout the year. To learn more about how each of these programs work, contact a mortgage banker. 

PHFA K-FIT Program 

• Offers forgivable loans of up to 5% of the purchase price for Pennsylvania homebuyers, helping cover down payments and closing costs. 

First Front Door Grant 

• Provides up to $15,000 in assistance for qualified first-time homebuyers, with a focus on covering down payments and closing costs. Funding for 2024 has closed. 

Philly First Home Grant 

• Offers up to $10,000 in forgivable grants for homebuyers purchasing homes in Philadelphia. 

Top Questions Loan Officers Ask You

During the mortgage application process, loan officers will ask you several questions to assess your eligibility and find the right loan for your needs. Being prepared with accurate information can help streamline the process. 

Common Questions Loan Officers Ask 

1. What is your employment status and income level?
   • Lenders want to confirm that you have a stable source of income to make mortgage payments. Be prepared with a two year employment history and income information.
2. What are your monthly expenses and debts?
   • This includes credit card payments, student loans, and other financial obligations to calculate your debt-to-income ratio.
3. How much do you plan to use as a down payment?
   • Loan officers need to know your financial preparedness and whether you’ll require down payment assistance programs.
4. What type of property are you looking to purchase?
   • The property type can impact the loan options available to you.
5. What is your budget?
   • Be ready to share with your loan officer the monthly payment you’re comfortable with for your housing expenses. 

Preparing to answer these questions can help you move forward in the mortgage process with confidence. 

Equipping Yourself with Key Questions to Ask a Mortgage Lender

Preparing yourself with these questions to ask a mortgage lender will empower you to make confident decisions during your homebuying journey. By addressing these key questions and being prepared for the ones loan officers ask you, you’ll be better equipped to secure the right mortgage for your needs and turn your dream home into a reality.

For personalized guidance and support, visit Quaint Oak Mortgage and start your journey to homeownership today.