Buying a home is one of the biggest purchases someone will likely make in their lives. Owning a home is part of the American dream and a place where families can create memories.
Many home buyers are unaware of the details of the home loan process, however. While it is tempting to jump right into looking at houses, homebuyers should consider applying for a home loan first so they have a good idea of what they can afford. If the buyer is approved for a loan, this also shows sellers that they are serious.
To help, we have compiled five of the most common questions home buyers have about home loans.
What is the difference between a fixed-rate loan and an adjustable-rate loan?
The interest on a fixed-rate mortgage doesn’t change, while an adjustable rate will be fixed only for a specific timeframe. It will then increase or decrease after that timeframe. This adjustment will be based on the market. There is a cap, however, on how high it can go and a floor to how far it can drop. Adjustable-rate mortgages typically have lower initial interest rates, and fixed-rate mortgages result in more predictable monthly payments.
How much cash will I need?
The answer depends on how much the house is and which loan program is being utilized. Home buyers do need funds for an earnest money check when an offer is made. The down payment could be nothing, or as much as they want/can afford. Closing costs vary based on loan amount and the loan program.
What is the difference between pre-qualification and pre-approval?
A pre-approval is based on an underwriter’s review of the home buyer’s file. A pre-qualification is based on a loan officer’s review of the home buyer’s file. A home buyer can use either to make an offer on a home, but a pre-approval is considered stronger because it is based on verified financial documentation and other personal information.
What’s included in my monthly mortgage payment?
It will include the interest, taxes, principal, and insurance.
What is a lock rate?
This guarantees a blend of interest rate and points to the buyer for a specific amount of time. This guards against fluctuations in the market.
If you have any questions about getting a home loan, contact us today for a free consultation!
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