- Buying versus Renting: Most importantly, compare the initial and ongoing costs of buying versus renting.
- When renting, you lack control over lease renewal, cost of the lease, and the maintenance provided by the property management.
- When buying, you have predictable mortgage payments, but responsibility for the down payment, closing costs and maintenance.
- What is the difference between pre-approved and pre-qualified?
- When you are pre-qualified, you have provided the lender/broker with the basic information to determine which program you may qualify for.
- When you are pre-approved, the lender/broker has collected, verified and presented the information needed for underwriting and approval.
- What is an escrow account?
- It is a separate account that holds funds to pay bills such as homeowner’s insurance and property taxes. The lender collects an amount in addition to your monthly mortgage payment and then pays the bills for you as they come due. This is done so these costs are spread over twelve months making them easier to budget. For some loans, escrow accounts are a requirement.
- Understanding Appraisals:
- A home appraisal is an unbiased estimate of the true (or fair market) value of what a home is worth. Lenders order an appraisal during the mortgage process so that there is an objective way to assess the home’s market value and ensure that the amount of money requested by the borrower is appropriate. Property value is based on such factors as location, amenities, structural condition and recent sales of similar local properties.
- What is Private Mortgage Insurance (PMI)?
- It is a special type of insurance policy, provided by private insurers, to protect a lender against loss if a borrower defaults. Most lenders require PMI when a homebuyer makes a down payment of less than 20% of the home’s purchase price. PMI allows borrowers to obtain financing if they can only afford (or prefer) to put down only 5% to 19.99% of the home’s cos, but it comes with additional monthly costs.