Summary: Speaking with a mortgage company in OR is an important first step before you start searching for a new home. Read on to find out what important questions you should be asking these professionals in order to get the best mortgage product for you.
If you’re considering a home purchase in Oregon some time soon, your first step would be to inquire about a mortgage to help you finance such a big purchase. That would entail a chat with a mortgage company in order to find out how to go about applying for a home loan and getting the right mortgage product for you.
But this conversation should involve some questions asked on your part. So, what should you inquire about when speaking with a mortgage specialist?
Here are some important questions to ask your mortgage company in Oregon in order to make an informed decision about your home loan.
1. How Much Can I Afford?
A critical piece of information you need before you start house hunting is how much you can actually afford in an Oregon home purchase. You might think that you have an idea of how much you can afford based on your income and monthly debt payments you already have to pay, but you’ll get a much clearer picture by speaking with a mortgage agent. These professionals will gather all the pertinent information needed to gauge your financial situation and determine exactly how much your lender would approve you for.
This is probably one of the most important questions to ask your mortgage company, because not only will it help you save time and effort, but it will also save you from disappointment. It will also help you determine a monthly mortgage payment amount that will fit comfortably with all of your other debt obligations so you don’t end up “house poor” and unable to keep up with all your bills without having much money left over for anything else.
2. What Type of Mortgage in Oregon is Best For Me?
There are many different types of home loan products available in Oregon, and there’s not just a one-size-fits-all solution. You need to choose a mortgage product that best suits your financial situation, which is why a variety of loan products exist. Be sure to ask which type of products your mortgage lender offers and which one they believe is best for you.
For instance, fixed-rate versus variable-rate mortgages should be discussed, the former of which comes with an interest rate that doesn’t change and the latter that comes with a rate that may fluctuate at various intervals throughout the loan term. There are also conventional versus FHA-backed loans, both of which come with different down payment and credit score requirements. Your mortgage lender will help you determine which loan type is best for you.
3. What Interest Rate Can I Get?
Another super important question you should be asking your mortgage company is the interest rate you will be charged on your mortgage. This can have a massive difference on the overall amount that you end up paying over the life of your loan. Even one percentage point can mean the difference between tens of thousands of dollars by the time the mortgage term comes to an end.
For illustration purposes, let’s compare how much you would have to pay in interest on a $400,000 mortgage over 30 years with a 4% versus a 5% interest rate. On a 4% rate, your mortgage payments would be $1,902 and your total interest paid would be $284,746. With a 5% interest rate, your mortgage payments would be $2,134 and your total interest paid would be $368,514.
As you can see, you’d be paying over $200 more per month with the 5% rate and over $80,000 more in interest over the mortgage term. Negotiating the lowest rate possible is incredibly important in order to make your mortgage as affordable as possible.
4. Are You a Broker or Direct Lender?
You can speak directly with the lender that will be supplying you with the loaned funds, or you could be speaking with a mortgage broker who serves as the middleman between lenders and borrowers. There are benefits to working with brokers, as they can shop around with different lenders to find the best mortgage product, terms, and interest rate on your behalf without you having to do all the comparison shopping and legwork yourself.
5. How Much Down Payment Do I Have to Put Down?
The down payment required will depend on the type of mortgage you take out and your financial credentials. Generally speaking, conventional mortgages require a 5% minimum, with a 20% minimum needed in order to avoid paying mortgage insurance. FHA-backed mortgages need a minimum of 3.5% depending on your credit score. The amount you need will come down to a combination of factors, so make sure to ask your mortgage company this important question.
6. Do I Have to Pay Mortgage Insurance?
Mortgage insurance may have to be paid on a mortgage in order to protect the lender from borrowers defaulting. The risk of default is higher for those who have a lower credit score and have a high loan-to-value ratio. Putting a small down payment towards the mortgage will mean that a higher loan amount would be needed, which could place the lender at higher risk.
In order to offset this risk, mortgage insurance may be required to be paid, which is an additional fee that borrowers would have to pay in addition to paying the loan amount – plus interest – back.
Generally speaking, a down payment of less than 20% on a conventional mortgage would require Private Mortgage Insurance (PMI) payments. If you’re taking out an FHA loan, however, mortgage insurance is required regardless of your down payment amount. That said, the premium amounts will need to be specific, so make sure to ask the mortgage company you’re working with how much your premiums would be if you have to pay this insurance premium.
7. What Are Discount Points?
One “point” is equal to 1% of your loan amount. So, two points on a $100,000 loan, for instance, is equivalent to $2,000. Discount points can be used to reduce your interest rate, so the more points you are willing to pay upfront, the more your interest rate can be reduced. Some lenders may allow you to “buy down” your interest rate, so be sure to inquire about this if it is something you’d be interested in.
8. What Are All the Costs Involved?
Your mortgage payment, mortgage insurance, interest rate, and upfront discount points aren’t the only things that may be included in your mortgage. There are other fees that you may have to cover as well, and it would be in your best interests to find out what these are.
These can include fees associated with having your credit report pulled, escrow fees, title insurance fees, appraisal, and taxes. Lenders are required to supply you with a document that details all of this pertinent information before you finalize your mortgage, so be sure to ask for this before you sign on the dotted line.
9. Can I Lock in My Loan Rate?
If you’ve been quoted a really good rate, you may want to know if you can lock it in before rates start to increase in the near future. As already mentioned, a lower rate can make your mortgage much more affordable and will allow you to pay less in interest over the life of your loan.
Ask the mortgage company if you can have your interest rate locked in, and if so, if there is a fee associated with this service. Be sure to get it in writing and determine how long the rate can be locked in for.
10. Are There Any Early Prepayment Penalties?
If you happen to come up with a large sum of money at some point in the future – whether it’s from a big tax refund, inheritance, lottery winnings, or a pay raise – you may want to put it towards the principal portion of your mortgage. But lenders typically charge in early prepayment penalty fee, if they allow them at all. Make sure to ask about these potential fees.
Need a home loan?
At Sammamish Mortgage, we’ve been helping borrowers in Oregon, Washington, Colorado & Idaho get the mortgages they need to turn their dreams of homeownership into reality. With over 25 years of experience in the industry, we understand all the ins and outs of mortgages and would love to be of assistance to you. We offer a wide variety of mortgage programs and tools with flexible qualification criteria. Please contact us today to get a rate quote or to apply for a mortgage in Oregon.