Questions to Ask a Mortgage Lender: How Much Home Can You Afford?

You’ve made an appointment with a loan officer to ask about buying a home. What’s the first question they’ll ask?

A mortgage lender probably wants to know what you can afford. Or, at least what you think you can afford based on your finances. But how do you know?

Online mortgage calculators are helpful tools but, ultimately, you should speak with a professional to understand how your specific circumstances might play into your ability to buy. Credit score, down payment and monthly income are all determining factors.

Talking to a pro is your best bet, and knowing the right questions to ask a mortgage lender before that first meeting can make the conversation a lot more useful.

Come Prepared, Leave Confident

These are the questions we recommend asking a mortgage lender before you’re even ready to buy, not after you’ve already committed to a house.

What should I have ready before we even talk?

You don’t need a finished file, just a rough sense of your income, what you already owe each month, and what you already have saved. A first conversation is exploratory, so its purpose is to understand your situation, not test you on it. There’s no real way to show up “wrong.”

How long is the process, and what happens at each stage?

From that first conversation to closing day, expect a few distinct stages: the conversation, a formal application, underwriting, and closing. Once you’re in the formal process, the timeline typically runs 30 to 45 days, though your loan officer can give you a clearer estimate once they know your situation.

What is the difference between prequalification and preapproval, and which do I need right now?

In general, prequalification is a quick estimate based on the numbers you provide, while preapproval takes things further: it involves verified documentation and carries real weight with sellers when an offer is made.

The terms get used loosely across the industry, so it’s worth asking any lender you talk to exactly what their version of each step involves before you start touring homes.

Who will I actually be working with, and will you still be there after closing?

At Sunrise Banks, mortgage decisions are made locally by people who know the market they, and you, are living in.

Bring these questions to a conversation with a Sunrise Banks mortgage officer, and you’ll leave with a much clearer sense of where you actually stand.

The 28/36 Rule for Mortgages

The affordability question comes up in nearly every first meeting with a lender, and it’s worth understanding before jumping in.

For starters, it’s important to know how much you should be spending on a mortgage payment each month. Sunrise Banks Director of Mortgage Sales Chuck Meier says a general rule of thumb is using the 28/36 ratio.

What percentage of income should go to a mortgage? The 28/36 ratio states no more than 28% of your gross monthly income should go to a mortgage payment, and your total debt load shouldn’t be more than 36% of your gross monthly take-home pay.

That means that, hypothetically, someone who brings in $10,000 each month shouldn’t pay more than $2,800 on their mortgage or $3,600 on total debt expenses. By total debt, we mean any other payments you’re making on top of your mortgage cost. This could be a car loan, student loan debt, or credit card payment. Meier says the 28/36 ratio can fluctuate depending on your financial situation, too.

What credit score do I need to buy a house?

There’s no single required score, but it matters for how much flexibility you get. A credit score of 740 or above can qualify you for a higher total debt load with some mortgage lenders, up to 45% of your gross monthly income, instead of the standard 36% under the 28/36 rule.

Closing Costs and Other Considerations

Another thing to consider: Your down payment to purchase the home isn’t the only cost involved, as there will be closing costs and prepaid costs to set up escrow as well.

So what is included in closing costs? Meier says that you can expect another 2-3% for closing costs and prepaid expenses:

• Closing costs: appraisal, title fees, and lender fees, to name a few
• Prepaid costs: upfront fees paid to set up escrow accounts for taxes and insurance

He added that a prospective buyer’s financial planning plays a role, too.

“Do you have kids? Are you having a family? Saving for retirement? These are all questions to consider,” Meier says. “You can’t be strapped to make a payment. That’s why it’s always important to meet with a loan officer in person. They can bring up different points surrounding your situation.”

Meier adds that a mortgage lender will look to help clients “buy as much house as possible” while maintaining a level of disposable income that allows buyers to retain quality of life and remain financially healthy.

“A physician that’s just starting out – they’ll make more money fairly quickly, so you might want to guide them to maximize their qualifications right off the bat,” says Meier.

What Your Loan Officer Will Ask You

A calculator can spit out a number, but it can’t see the whole picture the way a loan officer can. 

Here’s a fair heads-up on what an in-person meeting typically covers (including commonly asked questions) to help you prepare for your meeting with a mortgage lender.

What do you earn, and how steady is it?

Your lender will want to know your income and employment history, including whether it’s salaried, hourly, commission, or self-employed. Meier points to a physician just starting a career as an example: a lender may factor in where your income is headed, not just where it currently stands.

What else are you paying every month?

Car loans, student debt, credit cards. This is the arithmetic behind the 36% side of the 28/36 ratio above.

How much have you saved, and where did it come from?

Lenders want to see what you have available for a down payment plus closing and prepaid costs, and they’ll verify where those funds came from. Gifts and recent large deposits will come up, so it’s worth knowing that documentation is normal and expected.

What does your credit history look like?

Your score, plus the story behind it. If your file is thin or has some dings, that’s a starting point for the conversation, not necessarily an immediate rejection. The Credit Builder program at Sunrise Banks is one option loan officers point buyers toward when they need a little more runway before applying.

Making Homeownership Attainable for All

Not every first conversation ends with “you’re ready.” If yours ends with “not yet,” it’s still a conversation worth having.

Sunrise Banks strives to make homeownership an option for everyone. And that’s why, as Meier points out, our lenders are here to help devise strategies for those who aren’t quite ready to purchase a home.

Meier says he might talk with some clients about ways to raise their credit score, like taking out a credit card and making payments on a monthly basis. Someone might also be a good candidate for our Credit Builder program.

“We’re not turning them down, but rather positioning them to come back to us in the future,” says Meier. “You don’t want to go through all the red tape and then have to deny them.”

Our goal is to help you work toward owning a home; a big part of that is thoroughly explaining the process and options that are available to you.

Start With a Conversation

A first meeting with a mortgage officer costs nothing and commits you to nothing. Reach out to one of Sunrise Banks’ mortgage officers today to learn more.

Member FDIC / Equal Housing Lender