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February 28th, 2022 at 11:00 am

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Buying a home can lead to a lot of confusing questions as a first-time homebuyer, including which questions to ask your mortgage lender.

With so many people taking the leap into homeownership and investing in their future, we sat down with Danny Valentini, Area Manager for Prosperity Home Mortgage, to ask what he thinks homebuyers should be asking their lenders before purchasing a home.

With Danny’s help, we narrowed it down to five questions that borrowers should ask when applying for a home loan.

1. Am I working with a broker, bank, or mortgage banker?

Why is this important to know? Mortgage brokers act as facilitators of loans, while mortgage bankers and banks actually fund loans. Brokers may have access to more loan programs, but banks have more control over the process. In the middle are mortgage bankers, which offer the best of both: They often have access to a lot of programs and still maintain control of the process and funding. 

2. Can you lock the interest rate up front at the time of application?

As a borrower, it’s important to know exactly which rates and costs are associated with a quote up front. Locking in up front is more critical today because of the volatility of rates. A change in rate upward can significantly push up the long-term cost of your loan. The higher monthly payments can also affect a your ability to qualify for the loan.

Danny’s recommendation is to lock up front 30 to 45 days, depending on the purchase contract timelines. Ask your local real estate agent which lender they trust. You may want to research online to get a general idea of where rates are, but the recommendation of your real estate agent should be heavily considered.

3. Is there a pre-approval program for buyers?

A a borrower, you are competing with investors and buyers with cash, so it is critical to get pre-approved for a loan. With a loan commitment in hand, you can effectively emulate cash buyers. This is an important tool to compete with cash buyers and win offers.

4. Is there a “closing on time” guarantee?

Again, this helps you to compete against cash buyers that often can close faster than a buyer who is applying for a loan. Getting a pre-approval alongside a seller closing guarantee will help you win an offer in a competitive market. It is imperative that you ask your local real estate agent about which lenders offer both programs.

Danny and Prosperity Home Mortgage are proud to offer both of these options to help buyers make more competitive offers.

5. Do the lender’s jumbo programs offer the same qualifying flexibility that conforming loans do?

Conforming loans allow up to 50 percent of total debt against total gross income. Qualifying for jumbo loans, also called non-conforming loans, usually allows borrowers meet the 43 percent debt-to-income (DTI) ratio. Southern California’s conforming loan limit is $647,200 and anything beyond that level might fit into the jumbo loan pool. Ask your lender if they offer jumbo programs that allow up to 50 percent DTI. It’s important to know how flexible the lender is when you apply for a home loan.

What are next steps when applying for a home loan?

No matter which questions you ask your mortgage lender, Danny says it is imperative that you speak with a local real estate agent expert you trust before applying for a loan, especially as a first-time home buyer.

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