OBTAINING FINANCING

The best time to look for a mortgage is before you search for a house. This enables you to determine the amount of money you can borrow and how much house you can afford.

The difference between being pre-qualified and pre-approved is simple; pre-approval means that you have undergone an extensive financial, employment and credit verification process, whereas pre-qualification is when you give the lender verbal information without any verification. Pre-approval will give you an accurate loan amount for which you qualify. The lender’s pre-approval letter is normally valid for about 60 days.

The amount of money required to purchase a home depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, you need to come up with enough money to cover three costs; earnest money, down payment and closing costs. When you make an offer to buy a home and your offer is accepted, your earnest money is deposited into the real estate company’s trust account or into an account at the escrow company. Your earnest money will be applied to the down payment or closing costs.

The down payment is a portion of the cost of the home; it’s the difference between the purchase price and the mortgage amount, plus any closing costs. The more money you can put into your down payment, the lower your mortgage will be and the lower your monthly payments.

The minimum down payment required depends on the loan program you select. Most lenders offer mortgages with various down payment options, including no-down-payment and low-down-payment programs. Many types of loans require 10% to 20% of the purchase price.

You will pay a monthly cost for real property tax and homeowner’s insurance. You will also be responsible for paying your monthly utilities. These may consist of water, sewer, trash removal, yard waste, electricity and natural gas. If your utilities previously have been covered in your rent, this may be new for you. Your agent can help get information from the seller on how much utilities normally cost for the home, keeping in mind that usage requirements differ from family to family. In addition, you may have homeowner association or condo dues.

The Good Faith Estimate discloses estimated costs associated with your mortgage transaction. By federal law, it estimates the lender’s charges, the closing agent’s fees and estimated amounts for real property taxes and homeowner’s insurance.

Due to market fluctuations, interest rates are subject to change daily. Many lenders will allow you to lock in and/or float the interest rate once you have been approved for a loan. Check with your lender about any interest rate protection that is offered.