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Mortgage FAQ
Frequently Asked Questions

by Mike Selner

What’s the difference between being prequalified and preapproved?

  • Prequalification is completed when the borrower shares basic financial information like annual income, monthly debt structure, savings & investment information, and projected credit score along with their housing goals for the future. This aids the lender in understanding the scope of the transaction along with the creditworthiness of the borrower.

    A prequalification also does not require a hard pull of the credit profile when given, but rather at the point of application as an offer to purchase is completed. Because of this, a prequalification letter can be obtained quickly with no impact to credit score from a hard pull. The transaction is still subject to a credit report and documentation of income & savings.
  • Preapproval requires a credit report and documentation proving annual income, savings & investment balances, and monthly debt structure to verify the borrower can support the transaction. This is a more detailed look which generally takes longer to process and impacts your credit score.

How much home can you afford?

  • This is crucial to know as you start your search for your new home. The amount you can afford will be determined as we walk through the prequalification process and assemble a game plan to meet your goals.  Several factors will go into figuring this number out, including debt to income ratio, down payment, and mortgage product & rate. After the conversation, you will walk away with what you can truly afford and qualify for.

How do you lock your interest rate?

  • As soon as you have a signed offer to purchase for your new home and your loan application has been completed, you can lock the rate in. This is the earliest it can be done; however, you can choose to float the rate through the underwriting process depending on your appetite for risk of movement of the rate. Keep in mind that certain sale contingencies can also cause a delay in locking your rate. It is best to have all contingencies met before locking to avoid additional fees due to a possible rate extension.

What does your mortgage payment include?

  • Typically, your monthly payment will include payments for principal, interest, property taxes & homeowner’s insurance. If your loan to value exceeds 80% the mortgage insurance payment will need to be added to your monthly payment. If you start with less than 80% you have the option to waive the escrow portion of the monthly payment and mortgage insurance will not be required.

How long does it take to close on a house?

  • Typical target to close is around 45 days, but it does depend on the scope of the transaction and property type involved. There are federal regulations that have been put in place that lenders are required to follow. This could prolong the process at the best interest of the consumer.