Home Buying FAQs

By Bill Lyons | Published on November 25, 2024

General Home Buying FAQs

Why buy a home?

Buying a home is one of the most significant financial decisions you’ll make, offering both personal and financial benefits. Homeownership builds equity over time, potentially providing substantial returns on investment through property appreciation.

Additionally, owning gives you the freedom to customize your space and establish roots in a community. Unlike renting, your monthly mortgage payments contribute to owning a valuable asset, and you may also be able to write off mortgage interest on your taxes.

What’s the first step in the home buying process?

Getting pre-approved for a mortgage is always the first step before seriously shopping for homes. Having mortgage pre-approval doesn’t mean you’ll automatically be approved for the loan, but it helps you understand how much you can afford and shows sellers you’re a serious buyer. Before you buy a house, this step gives you a clear picture of your budget and strengthens your negotiating position.

Looking to get pre-approved for a mortgage? The Griffin Gold app makes this process straightforward, allowing you to start the pre-approval process right from your phone.

How long does it take to buy a house?

The total timeline for purchasing a home varies depending on several factors, including market conditions, your preparation, and the type of loan you choose.

While Griffin Funding aims to complete the mortgage process within 30 days, the entire journey from starting your home search to getting the keys typically takes 2-3 months. This timeline includes finding the right property, making an offer, negotiating terms, completing inspections, and closing the deal.

Home Loan FAQs

How do I determine the best type of mortgage to use?

The best mortgage type depends on your:

• Financial situation
• Down payment budget
• Long-term goals

A conventional loan often works well for buyers with good credit and stable income.

VA loans provide excellent benefits for veterans and active military members with zero down payment requirements.

For self-employed borrowers, bank statement loans offer flexibility by using bank deposits rather than tax returns to verify income.

Investors might consider DSCR loans, which focus on the property’s income potential rather than the borrower’s personal income. DSCR mortgages fall under the umbrella of investment property loans.

Any of our non-QM loan options could be suitable for those who don’t fit traditional lending criteria.

As you can see, there are many options, but the best loan depends on your circumstances. Luckily, Griffin Funding is here to help. Contact us to talk to a mortgage expert who can help you narrow down your home loan options and choose the right mortgage loan.

How big of a down payment do I need?

This is one of the most frequently asked questions when buying a home. Down payment requirements vary significantly based on your chosen loan program:

• Conventional loans typically require 3-20% down
• VA loans may require no down payment
• FHA loans usually require 3.5% down
• Jumbo loans often need 10-20% down
• Bank statement loans generally require 10-20% down

Ask your lender about specific down payment requirements for your situation, as factors like credit score and property type can influence these numbers.

What do lenders consider when you apply for a mortgage?

This home buying FAQ can help you understand whether you’re ready to apply for a mortgage. Lenders evaluate several key factors when reviewing your mortgage application:

• Credit score and history: Most lenders look for a credit score of at least 620 for conventional loans, though some loan programs accept lower scores. Your credit history should show a pattern of on-time payments and responsible credit use over time.
• Debt-to-income ratio: Lenders typically prefer a debt-to-income ratio of 43% or less, meaning your monthly debt payments (including your new mortgage) shouldn’t exceed 43% of your monthly gross income. Some loan programs may accept higher ratios with compensating factors.
• Employment history and stability: Most lenders want to see at least two years of steady employment in the same field. Frequent job changes or employment gaps may require additional explanation and documentation.
• Income verification and source: You’ll need to prove you have sufficient, stable income to make your mortgage payments. W-2 employees usually need recent pay stubs and two years of tax returns, while self-employed borrowers might use bank statements, proof of assets, or 1099 forms to verify their income.
• Assets and savings: Lenders want to see you have enough savings not just for the down payment but also for closing costs and reserves (typically 2-6 months of mortgage payments). They’ll verify the source of these funds to ensure they’re from acceptable sources.
• Down payment amount: The required down payment varies by loan type, from 0% for VA loans to 20% or more for buyers looking to avoid PMI on conventional loans. Larger down payments often lead to better interest rates and lower monthly payments.
• Property appraisal: The home’s value must be sufficient to secure the loan amount. Lenders require a professional appraisal to verify the property’s value and ensure it meets their standards for condition and safety.
• Previous rental or mortgage payment history: A strong history of making housing payments on time demonstrates your ability to handle the new mortgage payment. Lenders typically verify the last 12-24 months of housing payment history.

In most cases, lenders also review your bank statements, tax returns, and pay stubs, and verify employment to ensure you easily afford the loan payments.

What does it mean to get pre-approved?

This is a very common first-time home buyer FAQ. Pre-approval is a detailed evaluation of your financial situation where a lender reviews your credit, income, assets, and debts to determine how much they’re willing to lend you. Getting pre-approved shows sellers you’re serious about buying and gives you a clear budget for your home search.

Pre-approval letters typically include the maximum loan amount, estimated interest rate, and loan type you qualify for. This step is more thorough than pre-qualification and is often required before making an offer on a home.

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Refinancing FAQs

Why do people refinance?

Homeowners refinance their mortgages for various reasons:

• Lower monthly payments through reduced interest rates: When market rates fall significantly below your current rate, refinancing can lead to substantial monthly savings. For example, reducing your rate by just 1% on a $300,000 mortgage could save hundreds of dollars each month.
• Switch from an ARM to a fixed-rate mortgage: Many homeowners choose to refinance from an adjustable-rate mortgage (ARM) to a fixed-rate loan in order to secure more predictable payments. This protects against future interest rate increases and makes budgeting more predictable, especially if you plan to stay in your home long-term.
• Shorten the loan term: When interest rates drop, some homeowners refinance from a 30-year to a 15-year mortgage. While monthly payments might increase slightly, you’ll build equity faster and potentially save a lot in interest over the loan’s lifetime.
• Access home equity: Through a cash-out refinance, homeowners can tap into their home’s equity to fund major expenses. This option often provides lower interest rates than personal loans, making it a good choice for home improvements or consolidating high-interest debt.
• Remove private mortgage insurance (PMI): If your home’s value has increased or you’ve built at least 20% equity in your home, refinancing can eliminate PMI payments, potentially saving hundreds each month.
• Combine multiple mortgages into one loan: Consolidating a primary mortgage and second mortgage (like a home equity line of credit) into a single loan can simplify your finances and potentially lower your total monthly payment, though this depends on current market rates and loan terms.

The decision to refinance should align with your long-term financial goals and current market conditions.

What are the different refinancing options?

Rate-and-term refinancing and cash-out refinancing are the two main options available to homeowners.

A rate-and-term refinance is ideal for homeowners looking to improve their current mortgage terms without borrowing more money. This option allows you to secure a better interest rate, change your loan duration, or both. Many homeowners choose this option to:

• Lower their monthly payments through reduced interest rates
• Switch from an unpredictable adjustable-rate mortgage to a stable fixed-rate loan
• Shorten their loan term to build equity faster and save on interest
• Remove private mortgage insurance if they’ve built up sufficient equity

On the other hand, a cash-out refinance lets you tap into your home’s equity by replacing your current mortgage with a larger loan and receiving the difference in cash. This option can be particularly beneficial when you need substantial funds for:

• Major home improvements or renovations that could increase your property value
• Consolidating high-interest debt into a lower-rate mortgage
• Funding education expenses
• Covering unexpected medical bills or other significant expenses
• Investment opportunities that require substantial capital

When considering either option, it’s crucial to weigh the long-term implications. A rate-and-term refinance typically keeps your loan balance the same while potentially reducing your monthly payments or total interest paid. A cash-out refinance increases your loan balance (how much you owe in total) and monthly payments, but might be worth considering if you need access to significant funds at a lower interest rate than other borrowing options.

How long does it take to refinance?

Griffin Funding strives to complete refinancing within 30 days, though the exact timeline can vary based on factors like:

• Current market conditions
• Property appraisal scheduling
• Title search completion
• Loan program requirements
• Document verification process
• Underwriting review time

To ensure the fastest possible process, make sure you have all the necessary documents ready and respond as quickly as possible to any requests from your loan officer.

Bill Lyons

Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 22 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 10 years in business.