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Answers to Frequently Asked Questions <PREVIOUS PAGE>
What is the difference between "pre-qualified" and "pre-approved"? If you are "pre-qualified" through a lender, you have determined 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, land and school taxes, credit report, discount points, documentation fees, 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. This 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 is protection for lenders and homeowners against financial loss resulting from legal defects or other claims against the property's title.
Is VA or FHA financing unfair to sellers? FHA and VA loans provide purchasers the opportunity to buy homes with minimal cash investment and at lower interest rates. The result is a larger market for sellers, who also benefit by receiving all cash for their equity.
