Let’s take a look at some information that it is helpful to know about the process of buying a home.
1. What does it mean to get pre-qualified? This is an easy, free process that helps a home buyer determine how much money a home buyer can borrow to purchase a home. In order to get prequalified the potential home buyer must consult a mortgage loan officer. Get recommendations from friends or your real estate agent on a good mortgage company and loan officer that will get the loan completed and offer you a competitive interest rate. In the process of getting pre-qualified the loan officer will pull credit, look
at your assets and income.
2. What is the difference between pre-qualification and pre-approval for a loan? Once you are pre-qualified the next step is to get pre-approved. It is more detailed step in the process and requires a more in-depth assessment of your ability to purchase. More information will be required by your loan officer. They will asked for pay stubs, bank statements and tax returns. The reason to get pre-approved is that you are viewed by sellers and the realtor for the seller as being serious and stronger when you place your offer on a home. This may give you an advantage.
3. What are closing costs? Closings costs are the fees that are charged to the buyer for the services that are preformed to process and close the loan. These may include appraisal fees, title insurance, recording fees, loan closing fee and more. These closing costs could be shared with the seller. This should be discussed with your realtor.
4. What is included in a mortgage payment? Typically a mortgage payment includes principal (a part of the amount that you borrowed), interest (a charge for holding the loan), property taxes, and home owners insurance. Your payment may also include private mortgage insurance. If PMI is included depends on what percentage of down payment you had when you took out your loan to purchase your property.
5. What is PMI? PMI is private mortgage insurance. This is additional insurance that is required by your lender when your down payment is less than 20%. This protects the bank against loss if you default on the loan.
6. What is hazard insurance? It is insurance that is purchased to protect you from any financial loss on the property such as fire, wind, hail or other hazards.
Now you know some of the terminology and information that is helpful to know in purchasing a home. Contact us to set up an appointment to get more information and to learn more about the steps to home ownership.