Getting Pre-Approved

Most real estate agents and lenders recommend that home buyers get pre-approved with a lender before selecting a home to purchase. This way you will have the best information about the right price range for your pocket book.

Reasons to get pre-approved:

• It strengthens your offer to the seller. In today's market, without pre-approval, many sellers will not consider your offer.

• With pre-approval, you can determine which loan program best fits your need. 

• You will know exactly how much you are approved for. It's no fun to find your "ideal home" and then find out you can't afford it.

• Your monthly payment will be set. This will allow you to budget your money before making this large investment. 

• It shows you what the down payment and closing costs will be. 

• If you are a first-time buyer, you may be able to qualify for a special first-time buyer program which may allow you to afford more home for your money. 

• If you feel you would like and can afford a higher mortgage payment, but are not able to meet the lender's income qualifications, you may be able to arrange for a co-borrower or co-signer for you loan. 

Components of a Mortgage Payment

Your monthly mortgage payment is made up of several components. This housing expense is commonly referred to as a "PITI" or principal, interest, taxes and insurance. PMI (see below) and homeowner's association dues may also make up a portion of your total payment.

Principal
The original balance of money loaned, excluding interest. Also the remaining balance of a loan, excluding interest. The interest is calculated on the principal.

Interest
The charge for the use (loan) of money.

Taxes
The county assessor charges property tax based on the value of your home. Two tax installments are due each year. The first installment is due November 1 and is delinquent on December 10. The second installment is due February 1 and is delinquent on April 10.

Insurance/Hazard
A contract that pays for loss on a home from certain hazards, including fire. You obtain homeowner's insurance form your insurance agent. The standard policy pays replacement costs, minus depreciation based on actual cash value. Talk to your insurance agent about the different types of insurance available. Hazard insurance may be impounded.

Note: Taxes and insurance may be impounded, depending on the amount of your downpayment. Anything less than 20 percent down may require an impound account. An impound account is a trust account set up by the lender. A portion of the monthly payment is credited so that funds will be available for the payment of taxes and insurance. This way, the lender actually pays your tax bill for you.

PMI (Private Mortgage Insurance)

Depending on the amount of your downpayment, you may be required to have PMI. Anything less than 20 percent may require PMI. Because loans with small downpayments involve substantially more risk for the lender, they need protection in case the loan goes into foreclosure. Because this insurance is available, lenders can offer loans with lower downpayments.

PMI may require an up front fee which is payable as part of your closing cost, and is also required to be paid monthly with your payment. the cost of PMI varies according to the amount of your downpayment.

FHA charges a fee for mortgage insurance call MIP or Mortgage Insurance Premium. An up front fee (which may be financed) and a monthly fee are assessed. VA charges a funding fee which may also be financed

Prepare Yourself For The House Buying Process
Obtaining A Mortgage Loan Pre-Approval
Costs Associated With Home Buying
What To Expect When Viewing Homes 
Escrow & Title Process

Inspections
Moving day!

Antonette Burroughs, Realtor^®  t  510-604-6255  t Antonette@AntonetteBurroughs.com