General Mortgage Questions FAQ | Money Well Lending, LLC
General Mortgage Questions FAQ
How do I choose the best mortgage for my needs?
Choosing the right mortgage depends on your financial situation, homeownership goals, credit history, and available down payment. Options range from FHA and Conventional loans to VA and USDA loans, each suited for different circumstances.
Common scenarios we’ve helped clients navigate:
A young couple in Vancouver, WA with a 610 FICO score and limited savings successfully purchased their first home using an FHA loan (3.5% down on a $425,000 home).
College students attending Iowa State in Ames, IA with stable part-time income secured a Conventional loan on a modest $230,000 property near campus, using co-signer assistance.
A freelance graphic designer with inconsistent income qualified through a Non-QM bank statement loan, buying a $380,000 townhouse.
What’s the difference between prequalification and preapproval?
Prequalification offers a quick estimate of how much you might borrow based on self-reported information. Preapproval is a verified commitment from the lender after reviewing your financial documentation, strengthening your offer when house hunting.
Examples of successful preapprovals:
A buyer in Vancouver, WA preapproved for a $600,000 mortgage confidently outbid competitors because the seller trusted their financing.
First-time homebuyers transitioning from renting to homeownership utilized preapproval to quickly close on their $350,000 home.
Can I get a mortgage if I have poor credit?
Yes, even with lower credit scores, several mortgage options exist. FHA loans accept scores as low as 500 with 10% down or 580 with 3.5% down, while Non-QM options offer flexibility for unique financial circumstances.
Real-world solutions for credit challenges:
A buyer in Vancouver, WA recovering from a credit setback secured a $450,000 FHA loan with a 520 FICO score by providing a 10% down payment.
An entrepreneur whose credit fluctuated due to business cycles leveraged a Non-QM loan to purchase a $400,000 home.
What should I expect to pay in mortgage closing costs?
Closing costs generally range from 2% to 5% of the home’s purchase price. These include fees for appraisals, loan origination, title services, and more. It’s also wise to budget for these costs unless you negotiate seller-paid concessions.
Closing cost scenarios:
A buyer in Vancouver, WA purchasing a $500,000 home budgeted approximately $15,000 for closing costs, successfully negotiating the seller to cover half.
A couple included closing costs of $8,500 in their $320,000 mortgage, minimizing upfront expenses.
How much of a down payment will I need for a mortgage?
Down payment requirements vary widely by loan program:
VA and USDA loans: Often require no down payment at all.
Practical down payment examples:
Veterans utilized their VA loan eligibility to buy a $600,000 home with zero down payment.
A young professional in Salem, OR chose a Conventional loan, putting 5% down ($20,000) on a $400,000 home.
Should I choose a fixed-rate or adjustable-rate mortgage (ARM)?
Fixed-rate mortgages provide consistent payments throughout the loan term, ideal for long-term homeownership. Adjustable-rate mortgages start with lower rates that adjust after a fixed period, suitable if you anticipate relocating or refinancing soon.
Decision scenarios:
Buyers in Vancouver, WA chose a fixed-rate mortgage for stability on a $450,000 family home intended for long-term occupancy.
A couple opted for a 7/1 ARM to enjoy lower initial payments on their $550,000 home, planning to relocate within a decade.
When should I consider refinancing my mortgage?
Refinancing is beneficial when interest rates drop significantly, or your financial goals shift—such as shortening the loan term or tapping into home equity for expenses like renovations or debt consolidation.
Examples of effective refinancing:
A homeowner in Vancouver, WA refinanced their original $500,000 loan, saving $800 monthly.
A family leveraged refinancing to shorten their loan term by 10 years, building equity faster without significantly raising monthly payments.