A quick conversation about your income, assets and down payment is all it takes to get prequalified. But if you want to get pre-approved, we will need to verify your financial information and submit your loan for preliminary underwriting. A preapproval takes a little more time and documentation, but it also carries a lot more weight. 

Which is better? Think of prequalification as an initial step and preapproval as the green light signaling that you’re ready to start your home search. When sellers review your offer, a preapproval means you’re a serious buyer whose lender has already started the loan process.

When you start the process depends on how soon you’d like to buy a home.

If you’re ready to buy a home now, then you’ll want to get pre-approved for a mortgage. It will give you an accurate picture of what you can afford and show a seller that you’re able to make the purchase.

Buying “too much house” can quickly turn your home into a liability instead of an asset. That’s why it’s important to know what you can afford before you ever start looking at homes with your real estate agent. We recommend keeping your monthly mortgage payment to 35% or less of your monthly take-home pay. For example, if you make $10,000 a month before taxes, your monthly mortgage payment should be no more than $3,500.

The typical down payment on a house is between 3% and 20% of the purchase price. The amount you’ll be required to put down may vary depending on the loan program you use to finance the home purchase. If you put 20% down you won’t have to pay private mortgage insurance (PMI). PMI is an extra cost added to your monthly payment that doesn’t go toward paying off your mortgage.  

The truth is there is no single right answer for every home buyer. When saving money for a home, consider how long it will take you to save for a down payment versus changes in the housing market and your overall timeline to get into a home. Even though a 20% down payment can lower your mortgage payments and save you some interest in the long run, that may not be a realistic goal for every home buyer. Spend some time playing around with a mortgage calculator to find a scenario that works for you and your budget.

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PMI is for conventional loans and covers the lender if you stop paying your mortgage and default on your loan. The yearly cost of PMI is added to your monthly mortgage payment. You can request to have PMI eliminated once your outstanding balance reaches 78% of the original purchase price.

There are a few 0% down payment programs that will roll all costs into the mortgage, like VA and USDA home loans. These specific zero down programs are not available to everyone. You’ll need to meet certain eligibility requirements in order to qualify depending on the loan you’re interested in using.

Down payment assistance programs are also available to first-time home buyers and those who haven’t owned a home for at least the past three years. These programs are often offered by state, county or city governments that provide DPA support in the form of a grant or a second mortgage to cover the cost of the down payment, sometimes with benefits such as 0% interest and deferred payments.

Because mortgage interest rates can change day to day, locking your rate is an important part of the mortgage process. Locking your interest rate guarantees a certain interest rate for a specific period of time based upon a specific property.  The length of the lock is usually between 30 and 60 days. 

Mortgage interest rates go up and down and there’s no way to time it perfectly. You simply don’t know what the future holds. No one does. So don’t spend time trying to time the market; instead, ask us. We watch the market on a daily basis and can tell you if it’s a good time to lock your rate.   

Discount points, or mortgage points, are a way to prepay interest to get a lower interest rate on your mortgage. 

Each discount point equals 1% of your home’s value. That means if you’re getting a $400,000 loan and have one discount point, you’ll pay $4,000. In most cases, a point can reduce your interest rate by one-eighth to one-quarter of a percent. 

So what happens when you send in that mortgage payment every month? It’s nice to think the whole amount just reduces your principal, but your monthly payment actually goes toward a lot more. 

Here’s what the typical monthly mortgage payment includes: 

• Principal
• Interest
• Homeowners insurance
• Property taxes
• Private mortgage insurance (PMI), if you put down less than 20% on your home

If you want to pay more on your mortgage, be sure to specify that you want any extra money to go toward the principal only, not an advance payment that prepays interest. 

The average time to close on a house is currently around 30 days.  Factors such as your loan type, your financial situation, and the length of your contract can either lengthen or shorten that time frame.