Q. What is the difference between "pre-qualified" and "pre-approved"?
A. A pre-qualification consists of a discussion between a home buyer and a loan officer. The loan officer collects basic information regarding the customer's income, monthly debts, credit history and assets, and then uses this information to calculate an estimated mortgage amount for the home buyer. The pre-qualification is not a mortgage approval, but estimates what a home buyer can afford.
A. A pre-approval, on the other hand, is a comprehensive approach using basic information as well as electronic credit reporting. Pre-approvals, in most cases, are true mortgage commitments. The lender commits to financing your home and indicates the total mortgage amount available to you.
Q. What types of mortgage programs are offered?
A. Currently, there are over 50 different mortgage products available, including, but not limited to:
- 15, 20, and 30-year fixed rate loans
- Adjustable rate loans
- New Construction financing
- VA and FHA loans
- 5 and 7-year balloon loans
Q. How long does it take to process a mortgage application?
A. Usually about 45 to 60 days, although it can take as few as seven and as long as 90 days for some transactions. The actual time depends on how quickly the lender can get an appraisal of the property, a credit report and verification of employment and bank accounts.
Q. What documents will I have to provide?
A. Be prepared to provide verification of income (including a pay stub and recent tax returns), bank account numbers and details on your long-term debt (credit cards, auto loans, child support, etc.) If you're self-employed, you may also be required to provide financial statements for your business.
Q. Could anything delay approval of my loan?
A. If you provide the lender with complete, accurate information, everything should go smoothly. You may face a delay if the lender discovers credit problems - a history of late payments or nonpayment of debts, or a tax lien. You may then be required to submit additional explanations or clarifications.
Q. What do closing costs include?
A. Closing costs cover processing and administration of your loan. In addition to a loan fee, you'll usually be asked to prepay interest charges, to cover the partial month in which you close, and impounds for property taxes, hazard insurance and mortgage insurance.
Q. Can I pay those other things separately?
A. Not if it's an FHA or VA- insured loan. With most other loans, you can pay your own taxes and insurance if you borrowed no more than 80% of the purchase price or appraised value of your home. Check with your lender to be sure.
Q. When do mortgage payments start?
A. Usually about 30 days after closing. The actual date of your first payment will be included in your closing documents?
Q. What's included in my house payment?
A. Principle and interest on your loan. Depending on the term of your loan, the payment may also include homeowners insurance, mortgage insurance and property taxes.
Q. How much should I spend on the home site?
A. The property should be no more then 25% of the overall home package up to about $400,000. In the $500,000. to $750,000. range it can be higher, and when the total package is $1,000,000. or more you can spend up to 50% on the property.
Q. Is it advantageous to buy the property myself?
A. Not necessarily, because of the volume of business home builders do they may have negotiating leverage, therefore a successful builder may be able to provide the best value. Additionally, when a builder supplies the site, the unknown costs like utilities, building permits, finance charges and closing costs are part of the home package.
Q. How long does it take to build a custom home?
A. It takes approximately 4 to 6 months for a 3,000 square foot custom home to be completed once construction has started. Add about 5 weeks for each additional 1,000 square feet.
Q. What is a change order and what should I be aware of?
A. You can avoid major design or construction changes by paying close attention to every detail during the planning and design stages. However, changes do develop for one reason or another throughout the construction of your new home and you will want to be prepared. Budget an extra 7 to 10 percent of the cost of the home to cover change orders.
Changes are made by talking with the home builder, not by addressing the changes with someone at the construction site. You will be issued a change order form that outlines the changes. You will need to sign it and return the form to your builder, keeping a copy for your records. It's important to keep track of the additional expenses or you may have an unpleasant surprise at closing.