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- What is the difference between being prequalified and preapproved for a loan?
The difference between being prequalified and preapproved is simple:
If you're prequalified it means that you POTENTIALLY could get a loan for the amount stated to you, assuming that all of the information given was accurate and true.
If you're preapproved, it means that you have undergone the extensive financial background check - which includes looking at your credit history, previous tax returns and verifying your employment - and the lender is willing to give you a loan. You're APPROVED! So, they give you a letter that states such and it is valid for a approximately 60 days thereafter.
Notwithstanding the above, you will have an accurate figure which shows the maximum amount that you are approved for. Most sellers prefer buyers that have been preapproved because they know that there will not be any problems with the purchase of their home.
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- How can I figure out my debt-to-income ratio?
To figure out where you stand on the debt-to-income ratio, you must first understand the meaning of the figure. Most lenders use the ratio 28/36.
The first number, which is also referred to as the front-end ratio, is the percentage of your gross monthly income that you could comfortably afford to spend on your housing payments or mortgage. This figure includes the money you spend on property taxes and insurance as well as the loan payment itself.
The second number, which can also be referred to as the back-end ratio, is the percentage of your gross monthly income that should be spent on all long-term monthly debts combined.
Use the following guidelines to find out where you stand:
- First, figure out your gross monthly income (your income before taxes). To do this, take your gross yearly income and divide it by 12.
- Multiply this figure by 28 percent (.28). The amount you come up with is TYPICALLY the amount you could comfortably afford to spend on your housing payments per month.
- Now, take your gross monthly income (your gross yearly income divided by 12) and multiply it by 36 percent (.36). The figure shown should be the TOTAL amount of money you spend on ALL LONG-TERM DEBTS COMBINED. To get a more accurate mortgage estimate, tally up your monthly bills - which include car payments, credit cards, child support, alimony, etc. - and subtract this amount from the figure you just came up with. However much money is left over is the amount you should truly be spending on your housing payments per month.
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- If I want to buy a house and I know the property and the seller already have an agent, can I act as my own agent and negotiate a lower fee?
You probably don't have the correct knowledge to represent yourself. The seller pays the real estate commission, not the buyer, and real estate commissions are already set in the listing contract. It doesn't cost you anything to have your own agent represent you because the seller is already paying for it.
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- What are closing costs?
Closing costs are expenses incurred by buyers and sellers in transferring ownership of a property.
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- Why should I use a real estate agent?
A real estate agent is more than just a "sales person." They act on your behalf as your agent, providing you with advice and guidance and doing a job - helping you buy or sell a home. Due to the fast changing market, the data on available listings is not 100% accurate. There are times when you need the most current information about what has sold or is for sale, and the only way to get that is with an agent.
There are two types of agents, "Buyer's Agents" and "Seller's Agents". It used to be common for all parties involved to work for the seller, hence the term "Seller's Agent". Nowadays, you will most often find a different type of agent, the "Buyer's Agent". If you are in the market to buy, it would be advisable to use a Buyer's Agent. They can make recommendations on what terms and prices to offer as well as negotiating a deal with your best interest in mind. If you happen to be working with a Seller's Agent, never disclose to them the top dollar you are willing to pay for any property. Keep it narrowed down only to things that you would tell the seller directly.
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- What is comprehensive homeowners insurance?
What is comprehensive homeowners insurance?
Comprehensive is the most expensive type of homeowners insurance; it covers the most potential damages such as fire damage, water damage not caused by flooding (which would fall under your Flood Insurance policy), your personal possessions, personal liability, theft and vandalism. It is usually required that you carry at least a basic hazard insurance policy.
When concerning homeowners insurance, it's important to shop around as soon as possible to avoid being caught in a jam in the event that your insurance company refuses to insure your home.
You have two options concerning comprehensive homeowners insurance: Guaranteed Replacement Cost Coverage & Straight Replacement Cost Coverage. Guaranteed Replacement is not available everywhere, but is recommended if you can afford it as it pays to rebuild your home even if the amount to rebuild exceeds your policy limit. Straight Replacement is a cheaper choice, but it is limited. It will pay to rebuild your house in the event that it is destroyed, however it will only cover costs up to the policy amount - so if you choose this option, make sure to buy enough coverage to rebuild.
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- What is homeowners association (HOA)?
Homeowners association is a nonprofit association that manages the common areas of a condominium or "planned unit development" (PUD). Unit owners pay a fee to the association in order to maintain areas such as a pool or playground that are owned jointly.
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- What is the difference between being prequalified and preapproved for a loan?
The difference between being prequalified and preapproved is simple:
If you're prequalified it means that you POTENTIALLY could get a loan for the amount stated to you, assuming that all of the information given was accurate and true.
If you're preapproved, it means that you have undergone the extensive financial background check - which includes looking at your credit history, previous tax returns and verifying your employment - and the lender is willing to give you a loan. You're APPROVED! So, they give you a letter that states such and it is valid for a approximately 60 days thereafter.
Notwithstanding the above, you will have an accurate figure which shows the maximum amount that you are approved for. Most sellers prefer buyers that have been preapproved because they know that there will not be any problems with the purchase of their home.
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- What is joint tenancy?
A joint tenancy is an equal, undivided ownership in a property by two or more individuals.
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- What is a Multiple Listing Service (MLS)?
A multiple listing service is a computerized listing of the homes for sale in an area listed with a realtor. Agents are granted access to the MLS and can use it to find a house in a particular price range or area.
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- What is a counteroffer?
A counteroffer is an offer made by one party that makes changes to the original or latest offer of the other party.
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- What is a contingency?
A contingency is a provision included in a sales contract stating that certain events must occur or certain conditions must be met before the contract is valid.
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