Published July 26, 2022

Homebuying 101: Interview with a Lender - Charlie Hall, Fairway Mortgage

Written by Josh Shapiro

Homebuying 101: Interview with a Lender - Charlie Hall, Fairway Mortgage header image.

For many people, one of the most intimidating parts of the homebuying process is finding the right mortgage for their needs. Often, potential buyers will talk themselves out of home ownership because they believe they need to have massive amounts of cash in the bank, they need a perfect credit score, or they’re locked in for life. For this reason, it’s crucial that everyone find a lender who will put those concerns at ease, and work with them through the process of selecting the right loan.

Charlie Hall, branch sales manager and mortgage consultant with Fairway Independent Mortgage Corporation, has worked with many of our clients to help them break free of the restrictive cycle of renting, and achieve their dreams of homeownership! He recognizes that no mortgage is “one size fits all,” and he ensures each of his buyers get loans tailored to their specific circumstances and goals. We were lucky enough to get him to answer some of the most common questions we hear from our buyers.

What are the most common types of loans, and how do they differ?

The 3 most common loans are Conventional, FHA (Federal Housing Administration) and USDA (US Department of Agriculture). The USDA loan is location specific for “rural” housing. It only allows for a primary residence purchase and has an income limit that the buyer cannot make over a certain amount of money for that area. The FHA loan doesn’t have any income or location specifics, has a low down payment requirement, lower credit score requirement and can only be used for primary residence purchases. Conventional loans allow you to purchase a primary residence, 2nd home or investment property. The down payment requirement is a bit higher than FHA and this loan is more credit score driven. So, the higher the buyer’s credit score, the better the conventional loan terms will be.

What's the biggest misconception you've heard about mortgages and the financial side of home buying?

The biggest misconception I have heard is that you must have perfect credit to qualify for a mortgage. This is not true at all, life happens. There are a number of mortgage solutions for people who have lower credit scores. The FHA loan allows for a credit score of 580 or better.

What kind of credit should I have to qualify for a loan? If my credit score is low, what are the two most helpful things I can do to improve it?

Ideally a credit score of 620 would give the buyer access to all of the loan programs to see what is the best for their personal situation. If your credit score is low, paying down the balances of your credit cards to under 50% of the credit limit is helpful to get your score up. But the most helpful thing to do for your credit score is make sure your bills are paid on or before the due date so that there are no late payments on any of your accounts.

If someone's had a foreclosure, are they doomed for any future home loan?

Not at all. There are loan programs that allow a buyer to get a new home loan in as little as 3 years from the date of the foreclosure. It will be very important to let your lender know about your previous foreclosure and discuss with them why it happened and when it happened, as well as what you will need to do moving forward so that your credit profile shows a clean history moving forward from the foreclosure.

What factors play into a pre-approval and approval?

When you get pre-approved for a mortgage, it means that the lender has verified at least some of your financial information. The lender might require you to submit bank statements or allow them to view your credit report before you get pre-approved. This makes a pre-approval much more accurate than a prequalification. As a general rule, you’ll want to get a pre-approval before you begin shopping for a home. Remember that even with a pre-approval in hand, you aren’t guaranteed to close a loan. Once you get the property under contract, the lender will still need to do a full underwriting review on your income, assets, credit and the property (which means the lender will get an appraisal for the home you are purchasing).

Is it better to get a mortgage by myself, or to have a spouse/family member on it with me?

This question is really dependent on the personal situation of each buyer. It will depend on the buyer’s credit score and debt to income ratio. If those items do not allow for pre-approval up to the sales price range that the buyer wants, then adding someone else to the loan file could help them get a higher pre-approval amount. However, if that additional person has a lower credit score and/or higher debt to income ratio, it could hurt the mortgage pre-approval. Always best to talk to your lender about this and find the best way for the buyer’s specific situation.

How can I figure out what my budget is when home shopping?

The most accurate way to figure out your budget to purchase a home is to get pre-approved with your lender. Sure you could do a calculation of your current debt to income ratio and add an estimated monthly mortgage payment in to get to 45% of your gross income for all of your fixed expenses plus the new mortgage payment, but really, without the mortgage pre-approval you can’t make offers on a home anyway. So talking to your lender early, getting an idea for a budget that works with your other financial goals, is key.

What are the most important questions to ask a lender to make sure he's the right fit for me?

This really depends on what you are looking for in a lender. Do you want to work with just a salesperson that can take your mortgage order or work with a qualified mortgage consultant that can explain to you the difference of all the loan programs that are available to you? Ultimately you want to feel comfortable with your lender. You will want to find a person that can help suggest different options that will align with your thoughts, plans and goals so that your mortgage is best incorporated into your financial plans.

What's an "industry secret" a lot of lay people don't know about?

Making a higher down payment is not always the right move. Because you are financing your mortgage over a 30 year period, the difference in the mortgage payment is not going to change drastically if you make a larger down payment. A good estimate is for every $10,000 in a loan amount, the monthly payment will change by roughly $50 a month. So it might be a better over all financial idea to make a lower down payment, keep some of your money liquid so that you can invest those funds elsewhere and let that money make money for you rather than sit in the walls of your house not working for you.

Got more questions? Want to take the next step and talk about getting pre-approved? You can reach out to us any time, or go straight to the source! Charlie would be more than happy to chat with you about the mortgage process: