Once you have chosen your lender, you should receive a "Pre-Approval" letter, which is a very important element when submitting an offer. This way you will be prepared to preview and negotiate your home purchase with confidence.
REASONS TO GET PREQUALIFIED
With prequalification, you can determine which loan program fits your needs
You will know exactly how much you are qualified for
You can estimate your monthly payment. This will allow you to outline your budget before making this important investment
It allows you to see what the down payment and closing costs will be
If you are a first-time home buyer, you may be able to qualify for a special first-time homebuyer program, saving money and allowing a larger purchase price
Meeting with your lender to preview your financial options prior to shopping affords you the opportunity to consider what you really want and need before the emotions of purchasing your home engage.
TYPES OF LOANS
Adjustable-Rate Mortgage: Loans that have an interest rate that is adjusted at certain intervals based on a specific index during the life of the loan.
Balloon-Payment Loan: A fixed-rate loan that is ammortized over 30 years, but becomes due and payable at the end of a certain term, may be extended, or may roll over into another type of loan.
Buy-Down Loan: Fixed-rate loans where the interest rate and the payment are reduced for a specific period of time by passing the interest up front to subsidize the lower payment.
Community Home-Buyer's Program: A fixed-rate loan for first-time homebuyers with a low down payment (usually 3%-5%), no cash, no cash-reserve requirement, and easier qualifying ratios. Qualification is subject to borrower meeting income limits and attendance of a four-hour training course on homeownership.
Conventional Loan: Sometimes more lenient with the appraisal and condition of the property. When you are buying a "fixer-upper" you may need to use a conventional loan.
FHA Loan: Insured by the Federal Housing Administration under the Department of Housing and Urban Development. They offer a low down payment and are easier to qualify for than conventional loans.
Fixed-Rate Loan: Has a one-time rate that remains constant throughout the life of the loan.
Graduated Payment Mortgage: A fixed-rate loan that has payments starting lower than a standard fixed-rate loan, which then increases by a predetermined amount each year for a set number of years.
Mortgage Credit Certificate: A first-time homebuyer program is subject to purchase price and income limits in some areas. It is actually a special tax credit and assists the buyer in qualifying for many loan programs.
Nonqualifying Loan (Assumable): Pre-existing loans that can be assumed by a buyer from the seller of a property without going through the qualifying process. The buyer pays the seller for their equity and then starts making payments.
VA Loan: Guaranteed by the Department of Veterans Affairs. A veteran must have served 180 days of active service. The maximum loan is currently $203,000 with no down payment.