Answering First-Time Buyer Home Loan Questions
What’s the Difference Between Prequalification and Pre-Approval for a Mortgage?
Some use these terms interchangeably. But there is a difference between the two.
Getting FHA loan prequalification is more or less the lender’s estimate of your ability to afford the purchase based on the information you provide, such as your estimated credit score, gross income, and other information. No credit agency information is used here in typical cases.
FHA loan pre-approval is more official. This is the lender’s statement of what you can borrow based on third-party information from credit agencies, employers, and other sources. Pre-approval means being able to make a more serious offer on the home.
How Long Is My Mortgage?
You can choose between a 15-year and 30-year FHA mortgage in typical cases. The advantage of a 15-year mortgage is often lower interest rates and lower overall costs for the loan over its full term. But the disadvantage comes from higher monthly payments than a 30-year mortgage.
What Kinds of Closing Costs Should I Expect?
The actual dollar amount of your closing costs will vary depending on the transaction and other factors.
Expect to pay between two and six percent of the sale price of the home in closing costs. You may have expenses associated with the FHA mortgage that include mortgage insurance premiums, lender fees, and some or all of the following:
- Document preparation fees
- Application fee
- Appraisal fee
- Compliance inspection fees (where applicable)
- Title search fees
- Borrower-retained legal assistance
- Lender-required inspections
- Credit report fee
A real estate agent is not a requirement, but many people choose to work with one regardless. An agent is helpful for those who don’t know the local area, who need help finding a home near the right services or amenities, and who aren’t comfortable navigating the house-buying process.
Consider getting a lender before you find a real estate agent. Knowing you are prequalified or preapproved for a home when you start working with the agent can save you time and streamline the process.
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