Having a good real estate agent by your side that will educated you on the important facets of real estate is crucial. Being prepared before entering into a contract will put you into the position of being able to make cool, level-headed, decisions when it comes time to negotiate. Below I will introduce you to some of the most common real estate parlance that often surprises first-time buyers.
These two terms might sound similar, but can make a world of difference when it comes to getting your offer accepted on a property. When you’re searching for a home to buy, get pre-approved as soon as possible in the process. If you end up finding the home of your dreams sooner than later, you don’t want to risk missing out on it because you’re not pre-approved yet!
Getting Pre-Qualified
When you’re pre-qualified, this means that you’ve provided a lender with a summary of your finances, including your income, debt, and assets. The lender will use this basic information to make an estimate of how much money you’ll probably be able to borrow, which will in turn inform how much money you can spend on a home. At this point, the lender will provide you with a pre-qualification letter.
This preliminary step is helpful when you’re first starting the buying process—it can shed light on what type of home you should be looking for, how much you will likely be able to afford, and what you may need to work on financially to put yourself in a better position to buy the home you want.
I recommend getting this done before even looking at houses.
Getting Pre-Approved
Getting pre-approved is more serious and official. This process involves having a lender run a check on your credit, and you must provide a lender with official documentation of your financial situation. Your lender will then be able to pre-approve you for a mortgage for a specific dollar amount, and you’ll also know what your interest rate will be, since this is partially based on your credit score.
Obtaining loan pre-approval ASAP can save a lot of time, energy, and heartache in the end—beginning your home search with a clear picture of what is truly possible is crucial to a successful home buying process. Plus, you may be pleasantly surprised at what you can afford—many people overestimate what their credit score needs to be or how much of a down payment they need to have saved to get into the home of their dreams!
A seller will be far more receptive to accepting an offer that relies on financing if they know that the lender has thoroughly vetted the buyer.
Simply put, this is the money that comes out of your pocket going towards the purchase of your home.
Usually, down payments amounts and percentages are decided between you and your lender. Most loan products have minimum down payment requirements (VA and USDA don't require a down payment). For example, if you're looking to apply for a FHA with a 3.5% down payment and you want to buy a $500,000 (assuming you qualify for that amount), you can quickly calculate how much you will have to squirrel away in your bank account to cover that amount ($500,000 x 3.5% = $17,500).
You can use your down payment funds towards your earnest money deposit.
The more you put towards your down payment, the less money you'll have to borrow, meaning that your interest payments will be less. If you put at least 20% down, you can avoid paying primate mortgage insurance (PMI). PMI is an additional fee each month you have to pay until you have 20% equity in your home.
While not a facilitator of mortgage products, the Washington State Housing Finance Commission offers financial help for home buyers. These assistance programs are available directly through most lenders once you've been qualified.
Here are the steps to qualify for WSHFC assistance:
Step 1.
Attend a free Homebuyer Education SeminarStep 2.
Contact a Commission-Trained Loan OfficerStep 3.
Know what you qualify for and look for a home!