The Two Most Common Questions Homebuyers Ask

Navigating Homebuying: The Right Questions to Ask for a Smoother Process

Transcript

Ryan Hillard: Hi! This is Ryan Hillard with the Forward Mortgage Group and when we’re talking to homebuyers who are in the process of purchasing a home, getting pre-approved there are almost always two questions that they ask. I don’t want to say they’re the wrong questions, but they’re not the right questions. What we want to do today is address those two questions and then say, “How can we make them better?” What are the right or better questions that we can be asking to get information that is more specific, more pertinent, or more important to us as a homebuyer. As we go through the process and the discussion, we’re going to be asking you, the homebuyer, different things like: 

1. What are your plans for this home? 
2. How long do you want to stay there?
3. How much money do you have to put down?
4. Is this a primary residence or an investment property?
5. Is this a second home?
6. Do you have an idea of what your credit looks like?

Ryan Hillard: All of these different things that go into the equation to finding the best product and program for you! When we do that, and we kind of get to the end, or sometimes it’s even in the beginning. People may lead with this. They’ll ask the first question, which is…

What is my Interest Rate?

Ryan Hillard: Now, everyone seems to have a very big fixation on the interest rate, and I understand; I get it. It’s what has been marketed to everyone as the most important thing, but I’m here to tell you that maybe it’s not the most important thing; it’s one of the important things, but not always the most important thing. We know that if someone is only selling you on an interest rate, there’s a number of ways they can do that. I can tell you that your interest rate is going to be lower, but maybe not tell you and hide it in the fine print that you’re going to be paying a lot of money in order to get that rate. Might be a little deceptive, but there’s also a lot of online lenders and others that may do that and try to hide some of these things to hide the true cost of that rate to you. Now, another way or another tactic is someone could just put you in the wrong program. If everything were equal and I knew all that you cared about was the interest rate, than I can say, “Here you go, here is an FHA program, and it’s going to have a lower interest rate if everything is equal than what you might qualify for on a conventional loan.” That’s great. I’ve answered the question of, “What’s the best rate you can give me?” But, again, in those types of situations, you end up paying more for it in different ways; maybe more it’s more in mortgage insurance, maybe it’s more upfront costs. These are different items we would want to look for so we can make sure that we’re taking advantage of everything you have to put you in the best situation possible; so in doing that, what we’re going to do is run different scenarios. We’re going to show you what happens if your credit were to improve a little bit. Would that help you? What would happen if you put a little bit more down? If you were to get the funds or resources to put that down, would that help you? If you’re not going to be owning this home for a longer period of time, what does that make our options look like? Different things that will really assess how to put you in the best position to take advantage of the best rates, payment, and other factors once it comes time to lock in that rate. To wrap this part up, we know that rates are going to move on a daily basis, so the conversation we’re having about rates today may not hold true when you’re at the point of purchasing your home. Whether that’s next week or next month, or whenever that may be, the rates are going to change. We want to make sure we’ve accounted for all of those changes or potential changes by also showing you this is what it looks like today, but if rates were to move and they were to increase, here’s what it looks like. That way, you’re prepared for the market, you’re prepared as a homebuyer to go out and understand what the impact of changing or moving rates would be to make sure that it still fits within your budget. 

What’s the Maximum Amount I Can Qualify for?

Ryan Hillard: The next question that we get a lot as we’re going through this process is, “Well, what’s the maximum amount that I can qualify for?” It’s a good question, I would want to know what the maximum I can qualify for as well, but it’s not always that pertinent or tailored to you. If I said, “You could get qualified for a 2 million dollar loan!” Would you want to be qualified for a 2 million dollar loan? I don’t know. The reason you might not want to is you might not want is because you don’t want the payment that goes along with it. Too often, there is a disconnect between the home purchase price and the monthly payment, so what we want to do is ask different questions. We want to understand if I’m looking around this price range and I want my monthly payment to be around this price range. How do I understand these types of things? So the question ends up being, “How much can I be approved for by keeping my payment within this range?” Then when we go back and look at the other factors like your down payment and your credit score, we can start drawing out scenarios and show you as you’re shopping if we keep everything else equal and we take your payment at $400,000, $425,000, $450,000, $475,000, now you’re better equipped as you start looking at homes to know what might happen to the payment if I start moving up or down that price range. There are no surprises as you get to the point where you really want to make an offer. 

Ryan Hillard: 

Just to recap, two questions we get asked are:

1. What is my interest rate?
2. What is the maximum amount I can qualify for?

But, if we’re looking at these a little bit differently, the two questions that I would argue are asked a little bit better would be:

1.  How do I get in the best position to keep my payment low, given my situation?
2.  If I want to keep my payment within this range how much can I afford based on that with all of the factors that you know?

Ryan Hillard: I hope that’s helpful. If you have any questions on this, if there’s anything else I can answer for you, please feel free to reach out to me. This is Ryan Hillard with the Forward Mortgage Group.