Questions FREQUENTLY ASKED
What is the difference between pre-qualified and pre-approved? When a homebuyer is pre-qualified, they have provided the lender with the basic information to determine which loan program the homebuyer may qualify for. When a homebuyer is pre-approved, the lender has collected, verified and presented the information needed for underwriting and approval. In today’s competitive real estate market, most agents want to know with confidence that you are pre-approved. What determines my interest rate and should I lock it in? Rates are based on a variety of factors such as the loan purpose, your credit history and ability to repay the loan, the value of the collateral, and the loan amount. Locking your rate means that the lender is agreeing to provide you with your mortgage at your determined interest rate, ensuring it won’t go up (or down) between the time you lock it and the time that you close on your home. If your mortgage is fixed-rate, your interest rate will remain the same throughout the life of the loan. Mortgage interest rates fluctuate constantly, and you don’t want to start shopping for a house operating under a certain interest rate assumption, only to be unpleasantly surprised that interest rates have risen during your house hunt. What are the closing costs? Closing costs include items like appraisal fees, title insurance fees, attorney fees, pre-paid interest and documentation fees. These items are usually different for each customer due to differences in the type of mortgage, the property location and other factors. You will receive a good faith estimate of your closing costs in advance of your closing date for your review. Which amounts are included in my monthly payments? If you have a fully amortizing mortgage, portions of your monthly mortgage payment go toward loan principal and interest. Interest-only mortgage payments include only the interest that is due on the outstanding principal balance. If your mortgage carries mortgage insurance, a portion of your monthly mortgage payment will pay this also, unless the lender has paid your mortgage insurance or you have paid your mortgage insurance upfront. If you have set up an escrow account for your mortgage, then portions also go toward your property taxes and homeowners insurance. What is an escrow account and how does it work? An escrow account is set up by your lender to cover expenses like property taxes and homeowner’s insurance. A portion of these annual costs is added to your monthly mortgage payment, making it easier to budget and avoiding large lump-sum bills. The lender collects and manages the funds, paying the bills when they’re due. Escrow accounts are required for some loan types.
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