Pre-qualifying for a home loan:

1. Your lender will give you an estimate of what you can afford based upon how
   much you earn
    

2. You will know in advance approximately what your payments will be if you choose to make an offer.
    

3. Pre-qualify status usually means that your credit has not been evaluated by the lender so, they are just estimated based upon what you have told them.
   
    

Pre-approval will help you in the following ways:

1. You must fill out a loan application with the lender.
    

2. They will run your credit to determine your credit score.
    

3.  They certain bank documents and your monthly expenses to review.
    

4. Review with you all of all of the loan programs that your credit and income qualifies for.
    

5.  A Lender / Loan Officer can tell you what your maximum purchase price would
   be and give you an estimated monthly payment.
    

6. By taking care of this in the beginning, you can select the best loan package without being under pressure…if your offer just got accepted and you were only pre-qualified. 
    

7. Sellers tend to value your Pre-Approval status higher than a buyer who is just
   pre-qualified.
    

8. Most of lenders will shop for the lowest rates and terms based upon your situation and credit score.
    

9. You won't waste time looking at homes you cannot afford.
    

Learn more about the many factors that determine loan approval...


How much home can you afford will depend on 3 key factors:

• The down payment
• Your ability to qualify for a mortgage which includes your credit score, your income and debt or monthly expenses that create a ratio.
• The closing costs associated with your transaction. 
   

Down Payment Requirements:

There are 100% financing programs out there but your credit score has to be good.  Most loans  require a down payment.  It could be between 3.5% and 5.0% depending on the type of loan and the terms of that loan.  The more money you put down the better.  If you are able to come up with a 20-25% down payment or more, in most cases you can avoid paying private mortgage insurance.

Make sure you discuss all financial matters with your lender.  We have some references for you in our Mortgage Center.


Closing Costs:

It is kind of like sales tax but they cover fees for the escrow company, loan fees if any, title insurance and other fees required by law to record your property.

These fees must be paid in full at the final settlement (usually 5 days before the close of escrow), unless you are able to include them in your financing. Typically, total closing costs will range between 2-5% of your mortgage loan.  If you hire a buyer broker to represent you and you ask them, they will try to negotiate closing costs with the seller so that the seller pays for it.  It is possible.


How to Qualify for the Mortgage