Buying a home is one of the most significant financial decisions you’ll make, and understanding the mortgage process is key to making the best choice! Whether you’re a first time homebuyer or need a refresher on the process, you likely have questions about mortgages. We’re here to answer the most common questions and show you how Lisle Savings Bank can help make the home financing process simple and stress-free.
1. How Much Home Can I Afford?
Before you start house hunting, it’s essential to determine how much you can comfortably afford. Lenders typically recommend that your monthly mortgage payment (including principal, interest, taxes, and insurance) not exceed 28% of your gross monthly income. You can use online mortgage calculators to estimate your affordability, but talking to a loan officer will give you a more personalized assessment.
2. What’s the Difference Between Prequalification and Preapproval?
Prequalification is a basic assessment of how much you can borrow based on your self-reported income, assets, and debt. Preapproval, on the other hand, is a more in-depth process where a lender reviews your credit history and financial documents to determine the loan amount you qualify for. A mortgage preapproval gives you an edge in competitive housing markets by showing sellers you’re a serious buyer. It’s important to consider that some lenders may not underwrite a pre-approved loan which could hold up the process down the line. However, at Lisle Savings Bank, our underwriters pre-approve all loans, providing a smoother buying process.
3. How Much Do I Need for a Down Payment?
The traditional rule of thumb is a 20% down payment; however, if your down payment is less than 20%, you may need to pay private mortgage insurance (PMI) to protect the lender. At Lisle Savings Bank, we offer First Time Buyers the opportunity to avoid paying PMI with just a 10% down payment! Other available programs include our Down Payment Plus (DPP) Program, which provides income-eligible homebuyers with down payment and closing cost assistance.
4. What Are Closing Costs?
Closing costs are the fees you pay at the end of the home-buying process, typically ranging from 2% to 5% of the loan amount. These can include lender fees, appraisal fees, title insurance, and escrow costs. Our team provides transparent estimates upfront so there are no surprises at closing, and our Down Payment Plus (DPP) Program provides closing cost assistance to income-eligible homebuyers.
5. How Does My Credit Score Affect My Mortgage?
Your credit score can play a significant role in determining your mortgage rate and approval chances. Higher scores typically lead to lower interest rates, potentially saving you thousands over the life of your loan. Conversely, if your score is lower, you might face higher interest rates to mitigate the lender’s risk. To protect your credit during the mortgage process, avoid opening new credit accounts, making large purchases on credit, missing payments, closing old accounts, or co-signing loans, as these actions can lower your score or raise concerns with lenders. At Lisle Savings Bank, we do not price our mortgages based on your credit score; instead, we consider your down payment and loan term to provide you more favorable interest rates.
6. What Does Your Mortgage Payment Include?
Your monthly mortgage payment typically consists of four main components, often referred to as PITI:
- Principal – The portion of your payment that reduces your loan balance.
- Interest – The cost of borrowing money from the lender.
- Taxes – Property taxes that are usually collected and paid through an escrow account.
- Insurance – Homeowners insurance (and possibly private mortgage insurance) to protect against losses.
7. How Long Does It Take to Close on a House?
The mortgage closing process typically takes 30 to 45 days but can vary depending on loan type, appraisal timelines, and document processing. The steps include:
- Loan application & approval – Submitting financial documents for review.
- Home appraisal & inspection – Ensuring the property’s value aligns with the loan.
- Underwriting – The lender verifies your financial information.
- Final closing disclosure & signing – Reviewing loan terms and signing paperwork.
If you’re thinking about buying a home, let Lisle Savings Bank be your trusted partner. Contact us today or visit our mortgage lending page to explore your options and get pre-approved!