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 60-90 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. 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 traditional loans require 10% to 20% of the purchase price. 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.

You will pay a monthly cost for real property tax, homeowner’s insurance, and in some cases private mortgage insurance (PMI). 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.

Private mortgage insurance (PMI) is insurance that lenders require you to pay if you have a down payment of less than 20% on your home. This insurance protects the lender in case you default on your mortgage.

A fixed-rate mortgage has a set interest rate for the life of the loan, while an adjustable-rate mortgage (ARM) has an interest rate that can change over time. ARMs typically have lower initial interest rates, but they can be riskier because the interest rate can increase over time.

The time it takes to get approved for a mortgage can vary depending on several factors, such as the lender's processing time and the complexity of your application. Typically, it will take 1-3 business days to get pre-approved once all of your documents are submitted to the lender. In some cases, you may be able to get conditionally pre-approved for a mortgage, which can speed up the process of getting a final approval.