Purchasing Irvine, CA, real estate is a long-term commitment, especially if you’ll be taking out a loan. To obtain a loan, you’ll need to work with a mortgage lender who needs a variety of personal information and financial documents. Before committing to a mortgage lender, there are six main questions you should ask.
1. What Are the Qualifications for a Loan?
The requirements for each type of loan can be different, though most require having sufficient funds to cover the down payment and the closing costs. Most lenders require proof of income in addition to reserves that cover a minimum of six months’ worth of mortgage payments in the event you suddenly lose your income.
2. What Is the Minimum Down Payment Required for a Loan?
While most mortgages require a 20 percent down payment, there are some cases where the down payment may be as low as 3.5 percent. For example, FHA loans, or loans backed by the Federal Housing Association, may have a lower minimum down payment. However, these loans tend to be more expensive in the long run and may have higher interest rates.
3. What Are the Third-Party Fees Associated with a Loan?
In addition to all of the costs of the loan, like the interest rates, closing costs, and down payment, there are third-party fees that may be involved. These additional costs include taxes, the appraisal of the home, pest inspections, recording fees, and escrow if applicable. An estimate of all of the associated fees should be included in the loan estimate.
4. What Is the Interest Rate on the Loan?
The interest rate is a percentage of the principal that is charged when taking out a loan, and the rate offered depends on your credit and the loan. Both the interest rate and the mortgage balance, in addition to the loan term, ultimately determine the monthly payments. Some loans have a fixed rate, while others have interest rates that may change throughout the course of the loan term.
5. Can Interest Rates on a Loan Be Locked?
Locking interest rates can allow homeowners to benefit from lower rates even if interest rates rise. Depending on the lender, the rate might only be locked for a short time and there may be a fee. The longer the lock rate, the more expensive the fee may be.
6. Are There Penalties If a Loan Is Paid Off Early?
Some mortgage lenders have penalties if the loan is paid off early or if the principal balance is reduced by a certain percentage when the loan is refinanced. The prepayment penalty may be as much as six months of the interest. However, some prepayment penalties are only in effect for a certain number of years of owning the home.
You also need to have some questions ready for local real estate agents who can help you find the right house for sale. Irvine is full of wonderful houses, condos, and townhomes. Contact the trusted agents at Irvine Residential Living to see what’s on the market. Call 714-454-6304 today.