What is the difference between
pre-qualification and pre-approval?
Pre-qualification
is a lender's opinion of your ability to purchase a
home and is based on your verbal statement of income,
employment history and available down payment.
Pre-approval is a lender's underwriting decision
that you are conditionally qualified and is subject to the
lender's review of your completed application, credit check,
appraisal and home inspection.
When it comes to writing an offer for a home, a pre-approval
letter contains stronger language to the seller and the
listing agent than a pre-qualification. You, the buyer,
have the increased negotiating leverage of cash buyer status
because the mortgage is already in place.
A pre-approval can often be a determining factor in winning
the contract in a competitive bid situation.
What is the difference between
APR and Interest Rate?
The APR, or Annual Percentage Rate,
is often higher than the quoted interest rate, or note rate.
This is because the APR includes, in addition to interest, some
of the additional costs of obtaining your financing. Simply
stated, if there were no costs in obtaining financing, your note
rate and your APR would be the same.
Your APR will be noted on your Truth-in-Lending disclosure that
you receive after application
What are discount points?
A point equals one percent of the
loan and is usually paid at closing.
For example, if your loan amount is $100,000…then one point
would equal $1,000 OR one percent.
Discount Points are fees paid by the buyer to the lender to
reduce the loan's interest rate. If you plan to keep your
residence for five or more years, it may be worthwhile to pay
discount points to reduce your monthly payment and achieve
greater savings over the life of the mortgage.
The number of discount points required to buy down your interest
rate will vary based on the loan type.
Generally speaking, points are tax
deductible when you are buying a primary residence. Consult your
tax advisor for more information on tax deductibility
What are appraisals and surveys?
An appraisal is the estimate of the
value of the home you are purchasing and is provided by a
professional appraiser, trained in estimating the value of real
or personal property.
A copy of the appraisal is provided to you at closing.
Surveys determine whether there has been an encroachment on the
property lines, building lines or easements. If your home is new
construction, the builder may order the survey just after
completion or just before closing. Although we recommend that
all buyers purchase a survey, they are not required on
most mortgage products in Georgia. In Florida & North Carolina,
they are required on all mortgage products
What is the closing?
Closing will typically take place
at an attorney or title agent's office. The attorney or title
agent represents the lender - not the seller, real estate agent
or you - the buyer.
Your Realtor will give you instructions on where the closing
will be conducted, along with a phone number and a fax number
for the closing attorney or agent in case you have any questions
for him.
All borrowers associated with the loan transaction will be
required to bring a government issued photo ID such as a
driver's license or passport to closing.
Here's what you can expect to happen at the closing table:
-
The closing agent reviews the
HUD-1 Settlement Statement with both you and the seller. Next,
-
Evidence of required insurance
and inspections are presented. Then,
-
Signatures are collected for loan
documents including the HUD-1, mortgage or deed note and the
Truth-in-Lending statement. Next,
-
You submit a certified or
cashier's check to cover your down payment and closing costs.
Or, in some proceedings, money is drawn from an escrow account
established for your home purchase. Then,
-
The Lender provides a check to
the closing agent to cover the home loan amount. If your
monthly payments are to include property taxes and insurance,
a new escrow account (or reserve) is established.
-
Finally, you receive the keys to
your new home
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