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Answers to Frequently Asked Questions
What is the difference between "pre-qualified"
and "pre-approved"?
If you are "pre-qualified" you have determined,
with a loan officer, what price you can afford based on the
down payment, your debts and the amount the mortgage company
will approve for your mortgage. Being "pre-qualified"
is only a determination of your probable credit. If you are
"pre-approved", your credit, employment and funds
have been approved by the lender.
What are closing costs?
Closing costs are an accumulation of charges paid to different
entities associated with the buying and selling of real estate.
For buyers, they are usually about 4-6% of the total sales
price of a property. Some of the closing costs you might encounter
are: application fees, appraisal fee, county taxes, credit
report, discount points, documentation fee, escrow fees, homeowners'
association fees, loan fees, mortgage insurance, origination
fees, tax registration and title insurance premium.
What is a point?
One point is equal to 1% of the new loan amount. Whenever
government regulation, state usury laws and/or competitive
practices prohibit the lender from charging a rate of interest
that would make the real estate loan competitive with other
fields of investments, the lender must seek some method of
increasing the yield for the investors. By charging "points",
the lender can bring the real estate loan up to those other
investments.
What is earnest money?
When you make an offer, you will need to put up an earnest
money deposit as a sign of good faith that you are seriously
interested in buying a home. That deposit becomes a part of
the purchase price and is held in a trust account until there
is full acceptance of the offer. Typically, an earnest money
is 3-5% of the offer amount.
What is title insurance?
Title insurance protects the named insured against loss because
of defects, liens, encumbrances, adverse claims or other matters
not shown or disclosed to the new owner that attach before
date of policy.
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