For a first time homebuyer (and probably some 2nd, 3rd and 4th time buyers too!) the steps you take to secure a mortgage can be tricky. A lot of phrases get tossed around and if you haven't done your homework, then they're probably totally foreign to you! But, as a person who had absolutely no idea what she was doing when she set out to look for a new home, I can tell you, it's not as scary as it seems! There are 4 basic concepts regarding your mortgage that you should understand when you decide to buy a home. Here they are, explained:
1. Qualification - This can come from your Realtor, your lender or even your mom. All it means is that someone has taken a quick look at your income, assets and debt and has decided whether or not you will qualify for a loan.
2. Preapproval - The next step. A lender will review your credit and take a closer look at your financial history to decide how much you might be allowed to borrow. This can help you figure out how much you can actually afford to spend on a home, but based on your own circumstances you can always spend more or less. You can get preapproved even before you begin looking for a home!
3. Approval - This is a commitment from a lender to give you a loan once you have actually found a specific home that you would like to buy. At this time you would determine what type of loan you want, what your downpayment will be and other details of your purchase.
4. Lock - This is a commitment from a lender to a specific price, including the mortgage rate and points. Rates are constantly changing, but the idea is to lock in your mortgage at the lowest rate possible. In today's market, rates are changing on a daily, if not hourly, basis. It's ultimately your call, but many buyers lock as soon as their loan is approved since it's hard to determine whether the rate will go up or down in the days and weeks to follow.
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Happy Home Hunting!
Rochelle Vayo
