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The 3 Questions You Probably Asked Yourself when Applying for a Mortgage

If you are a first-time homebuyer, the process can seem intimidating and questions on credit, pre-approval, and rate have popped into your head when applying for a mortgage.

This video hopefully debunks some misconceptions on these 3 topics:

#1. Will running my credit hurt my credit score? Within a 45-day window, multiple credit checks from mortgage lenders are recorded on your credit report as a single hard inquiry. You can shop around and get multiple preapprovals and official loan estimates. The impact of an additional inquiry is small ( you may see a fluctuation of 3-4 points), but shopping around for the best deal can save you money in the long run. What you want to avoid is running your credit 5 or more consecutive times within a week. This will negatively impact your credit.

#2 – How long is preapproval good for? Typically preapprovals are good for 60-90 days. Lenders put an expiration date on pre-approval letters because they need to have your most up-to-date financial information on hand. The credit, income, debt, and asset items they reviewed for your pre-approval typically need to be updated after 90 days. If your financial circumstances change, the lender will want to reassess your finances.

#3 What rate can you offer me? This one is a long one to explain but I will try and keep it short. No lender can give you an idea of your rate without taking these factors into account:

Your Credit score

In general, consumers with higher credit scores receive lower interest rates than consumers with lower scores. That’s because Lenders use them to predict how reliable you’ll be in paying your loan.

Home location

Many lenders offer slightly different interest rates depending on what state you live in.

Home price and loan amount

Homebuyers can pay higher interest rates on loans that are particularly small or large.

Down payment

In general, a larger down payment means a lower interest rate, because lenders see a lower level of risk when you have more stake in the property. So, if you can comfortably put 20% or more down, do it—you’ll usually get a lower interest rate.

Loan term

The term, or duration, of your loan is how long you have to repay it. In general, shorter-term loans have lower interest rates and lower overall costs, but higher monthly payments.

Interest rate type

(fixed vs. adjustable rate) Fixed interest rates don’t change over time. Adjustable rates may have an initial fixed period, after which they go up or down each period based on the market. Your initial interest rate may be lower with an adjustable-rate loan than with a fixed-rate loan, but that rate might increase significantly later on.

Loan type

There are several broad categories of mortgage loans, such as conventional, FHA, USDA, and VA loans. Rates can be significantly different depending on what loan type you choose.

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