Mortgage Guide, Facts, and Info
Preapproval vs Prequalification
- Financial document produced by your mortgage bank
- Provides valuable information to the real estate broker on what the buyer can afford
- Simple calculation of the amount a buyer can afford, not an official document
- Can be produced with little to no documentation
Preapproval is the first step in buying your new home. Buyers should provide their mortgage brokers with all information necessary to accurately evaluate their financial situation. This information can include length of employment, credit history, and all sources of a potential downpayment.
What to avoid when buying a home
- Changing jobs
- Many lenders require multiple years of consistent work history.
- Should you change jobs, it should be within the same field and/or at a higher pay rate
- Changing banks
- Most new accounts or large deposits within the last 6-12 months will need to be thoroughly explained.
- Make sure you keep your receipts should make any large deposits or transfers
- Paying off large bills
- Your mortgage broker will advise you if it is necessary to pay off large bills in order to decrease your debt to income ratio.
- Large purchases
- Avoid making large purchases such as cars, vacations, or other tangible assets while being preapproved for a loan.
- Credit inquiries
- Avoid applying for new credit cards. Your credit score is affected based on the number of times it is pulled.
What is included in my mortgage payment?
- The amount of money borrowed.
- Cost of borrowing money. Have to pay to play.
- Property Taxes
- Taxes are paid to local governments on a monthly basis by the lenders.
- Hazard Insurance
- Protects the borrower against any financial losses due to fires, floods, or other hazards.
- Mortgage Insurance
- Policy that pays mortgage brokers for their financial losses should the borrower fail to repay their debts.