Homebuyers, particularly first-time homebuyers, may not know the ropes of the mortgage lending process. Luckily they have highly knowledgeable, qualified individuals available to them to pass on valuable information about financing a new home.
Lenders are pivotal to homebuyer education – the following are questions you should plan on being able to responding to from homebuyers.
What are the closing costs?
To a lender, the term “closing costs” might be second nature. But to a first-time homebuyer, it’s likely a foreign concept. Explain that buyers pay fees for lending and title services and that they will receive an estimated cost total soon after the loan application is submitted. Make sure your customers know that they will be responsible for these costs when the transaction is fully closed and title signed over.
What’s the difference between fixed-rate and adjustable-rate?
While consumers have options when it comes to loan types, explain to them what each means so they can make an informed decision. Explain that fixed-rate means their interest rate will stay the same for the life of the loan and that adjustable-rate means it may fluctuate depending on the market. The former is for long-term purchases and the latter more for short-term, temporary purchases.
What’s the minimum downpayment?
Upfront cost might be intimidating to some buyers. Explain their options and that the more money they put down now, the likelier that their interest rate will be lower for the duration. Depending on the buyer’s priorities, one of these options will sound more fitting for his or her situation. (Remember to offer a minimum amount and explain the threshold under which they’ll likely need mortgage insurance.)
The South Dakota Housing Development Authority (SDHDA) offers down-payment assistance to buyers in need. Check it out!
How long will this process take?
First-time homebuyers in particular will be anxious to get the ball rolling on financing so they can nail down their dream homes. Explain that the loan application process can take a couple weeks to a couple months, depending on the situation. Give them opportunities to provide documentation that might make the process go by more quickly.
What should I avoid prior to my loan closing?
Excited homebuyers may be over-eager in making major purchases for their future homes, such as appliances, fitness equipment, home improvements, etc. Make sure to let your customers know that they should hold off on major purchases until after closing day, as it will affect their credit and financial stability.
Who will service my loan?
If you’re servicing a loan that will later move out of house to another financial institution (similar to loans serviced in SDHDA’s First-Time Homebuyer Program), let your customers know that they may notice a shift in the handler of their mortgage after a certain point. This will eliminate any surprises they may experience when a different bank or credit union’s logo starts showing up on their monthly mortgage statements.
Lenders are a rich source of information when it comes to home financing – just make sure that you’re passing on these valuable details to the homebuyers who rely upon you.