Buyers FAQ

There are a number of questions that we hear from our customers on a regular basis about purchase mortgages and the purchase mortgage process. The purpose of this section is to help answer those questions and clear up any issues that our website visitors might be unsure of regarding purchase mortgages and the purchase mortgage process.

List of Buyers FAQ

  1. At what time in the buying process should I speak with a mortgage company?

  2. What's the difference between getting prequalified and getting preapproved?

  3. How much money do I need to have available to pay for a down payment and closing costs?

  4. What kind of loan programs are available in today's mortgage market?

Answers to Buyers FAQ

1. At what time in the buying process should I speak with a mortgage company?

Generally, the sooner you can speak with a mortgage company in the buying process, the better. While it is possible to wait until you've already found a home and agreed on a price with the seller, speaking with a mortgage company early in the process will at least give you an idea about what kind of loan programs you can qualify for.

In addition, speaking with a mortgage company early in the buying process will also give you an opportunity to get prequalified or preapproved. This can be a plus in your favor when negotiating with a seller, as they'll know that you have funds available to purchase the home and are not just wasting their time.

2. What's the difference between getting prequalified and getting preapproved?

A mortgage banker or broker prequalifies a potential borrower by going over basic credit, debt and income information that they have been told by the borrower. Borrowers can typically get prequalified with one phone call. After they've given the mortgage banker or broker their basic info, the mortgage banker or broker will then give them a maximum loan amount they could qualify for based on the information they've given.

A mortgage banker or broker preapproves a potential borrower by verifying their credit, debt and income information. This involves running a credit report on the borrower, and it may also involve filling out and processing a complete 1003 application form.

The mortgage banker or broker than gives the borrower a letter stating that they have been preapproved up to a certain amount, as long as standard conditions are met. Standard conditions include items like the property appraising for enough money and having a clear title report, and the borrower being able to document income and employment.

3. How much money do I need to have available to pay for a down payment and closing costs?

It depends. Assuming that you don't have major credit issues, most loan programs will require a 5 to 10% minimum down payment. However, there are many loan programs in today's mortgage market that allow borrowers to finance the entire purchase amount of a home, instead of paying a down payment up front and financing the rest of the purchase amount. These specialized loans are called zero down mortgage loans, and they are available as both fixed rate mortgage loans and adjustable rate mortgage loans.

Zero down mortgage loans typically have higher credit requirements than regular mortgage loans, because there is a higher risk of default (foreclosure) with a zero down mortgage loan than there is with a conventional mortgage loans. However, there are many different types of zero down loan programs available today including zero down mortgage loans for those with perfect credit and zero down mortgage loans for those who have some credit issues.

Some zero down mortgage loan programs will let you finance the closing costs in addition to the down payment. That means that the loan amount will be for the purchase price plus the total closing cost amount. Most loan programs though, including most zero down mortgage loan programs, will require you to pay for the closing costs when the loan funds. Closing costs typically total between 3 to 5 percent of the total loan amount, so between a down payment and closing costs, you should figure on a regular mortgage loan requiring between 5 and 15 percent of the total loan amount to be paid by the borrower at closing.

4. What kind of loan programs are available in today's mortgage market?

There are literally thousands of different loan programs are available in today's mortgage market, though most of these programs fall into one of three categories: fixed rate mortgage loans, adjustable rate mortgage loans and interest only mortgage loans.

In addition to standard loan programs, there are many types of loan programs that are specialized for certain situations. For instance, some loan programs are designed for first time home buyers, other loan programs are specialized for people with credit issues and other loan programs are specialized for people who don't want to spend much money out of pocket. For more information about loan types, click here.

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