What's the difference between getting pre-qualified and pre-approved?

​

When you get pre-qualified, you provide information about your monthly income and debts. A general estimate is provided to you of the size loan you will qualify for at a given interest rate. Getting pre-approved is a more detailed process. You make a formal mortgage application. Your credit is checked; supporting documentation is acquired for your income and assets; and your loan is officially approved, subject to your finding a home within that loan amount and price range. Having either a pre-qualification or a pre-approval is useful when you’re buying a home, especially if you’re competing with others for the property. Pre-approvals are usually only good for 120 days, so be prepared to update your credit documents if you don’t close within a certain period of time. Click here for a list of documents needed to get pre-approved.

 

How much do I need for a down payment?

​

Question number one when buying a home is usually “How much down payment are we going to need?” The necessary down payment is dependent upon the type of loan you receive (which can vary from 0%, as with VA loans, to 25% or more as with non-conforming loans), and how much you are comfortable paying each month. As an average, most homebuyers make down payments in the 3.5%-15% range, although your own personal situation may dictate more or less down payment. When you are factoring money for a down payment, don’t forget about closing costs, which will total in the 2%-5% range, payable in cash at the time of closing.

 

Can I use my IRA retirement funds for a down payment on a house?

​

For most first time buyers, you can use the funds in these retirement accounts without penalty. According to the IRS, if both husband and wife are first-time homebuyers, they each can withdraw up to $10,000 for qualified acquisition costs penalty-free for a first home. Retirement plans do vary and you should look into your specific plan in advance to confirm accessibility, if there are any limits on the amount and if there are any restrictions on withdraw.

 

What are closing costs and how can I anticipate how much they will be?

​

When the purchase or refinance of a property is finalized, various closing costs are collected, including but not limited to:
 

• Discount Points, or fees paid to lower the interest rate

• Processing Fees

• Escrow Deposit

• Title Insurance

• Appraisal

• Lender Fees

• Credit Report

• Courier Charges

 

What options are there for people with no money down and no cash for closing costs?

​

Although most programs require assets for down payment and closing costs, there are a few that don’t or may have minimal down payment requirements. Eligible Veterans can do a VA loan with no down payment.  USDA (agricultural) loans can be 0% down. FHA only requires 3.5%.  If you’re a first time home buyer, you may qualify for State sponsored down payment and/or closing cost assistance, which may require as little as $500 in borrower contribution, based on program qualification. Closing costs are typically 2 -5% of the selling price, which your seller could pay on your behalf as part of your contract negotiations.  

 

What's Title Insurance?

​

It's an insurance policy that guarantees the accuracy of the title work done on your home at the time of purchase or refinance and is provided by the title company. As a buyer, you are required to purchase a lender title insurance policy, which only protects the mortgage company, as part of your standard closing costs. Most buyers choose to purchase an owner title insurance policy, which would protect you against any loss in the event of any legal issues relating to the title of your home.