Homebuying FAQs
Buying a home comes with plenty of questions. Explore helpful answers about the loan process, mortgage options, insurance, and what to expect on your path to homeownership.
The Loan Process
Purchasing a home enables you to receive tax benefits while building equity that you can cash out in the future. Owning a home also gives you the opportunity to truly personalize your space.
Yes! Prequalifying first can help you save time and effort before you get too far into the process. You will know upfront how much home you can realistically afford. It also lets real estate agents and sellers know that you’re a serious buyer, which can be an advantage when making an offer.
Your lender will consider a number of factors when determining your maximum loan amount. Some of these include your debt-to-income ratio (how much of your monthly gross income goes toward paying debts), cash available for down payment and closing costs, and credit history.
An appraisal compares the current market value of the home you’d like to buy with other homes in the area that have recently been sold. A recent appraisal is necessary to confirm the property’s current value.
This is a guarantee that the interest rate you select for your mortgage loan will not change between the offer and closing and will be the rate used to set your monthly payment. Your loan must be process and close before the rate expiration date.
These are the fees and charges due at the closing of a real estate transaction. Both buyers and sellers pay various closing costs. A buyer's closing costs generally include (but aren't limited to):
Origination fee
Discount point(s)
Appraisal fee
Credit report
Recording fees
At closing, you’ll sign and receive copies of all legal documents that are recorded and filed for the property you’re purchasing. In addition, you will receive information regarding your monthly mortgage payment and servicing information for your new loan.
Insurance
This is an insurance policy that protects the lender in case of default, allowing them to approve a loan they might not have otherwise. MI can make buying a home with less than 20% down possible. If you're required to pay for MI, it's typically included in your total monthly payment, your closing costs due at closing, or both.
Homeowners insurance, also known as hazard insurance, is a policy that covers damages to your home, your belongings and accidents as outlined in your policy.
Yes, proof of homeowners insurance will be required before you can close your home.
Mortgages
Your loan officer will work with you to determine which loan product benefits you. They will review your current finances and future financial goals. Your loan officer will also consider factors like your target monthly mortgage payment and how long you plan to live in the home.
A fixed-rate mortgage has an interest rate and payment that stay the same over the life of the loan. With an adjustable-rate mortgage, the rate can either increase or decrease, based on market factors. The monthly payment can also go up or down based on the rate adjustment.
A balloon mortgage has a fixed-rate payment for the first 5 to 7 years of the loan, then a lump sum payment of the loan balance is due at a specified date when the loan matures.
A conventional mortgage is a home loan that is not offered or secured by a government entity (like FHA or VA). Conventional mortgages typically conform to the loan limits set by the Federal Housing Finance Administration (FHFA) and are eligible for purchase by Fannie Mae and Freddie Mac (the two government-sponsored enterprises that guarantee the majority of mortgages in the U.S.).
Unlike government loans like FHA, VA, and USDA, conventional loans can be used for more property types (primary residences, second homes, and investment properties). In addition to the popular 30-year fixed conventional loan, there are also more choices for loan structure, including 15-year or 20-year terms and adjustable-rate mortgages.
This is a loan that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA) and is ineligible to be purchased Fannie Mae or Freddie Mac. Jumbo loans can come with maximum limits up to several million dollars. Luxury homes or properties in highly expensive markets are typically financed with jumbo mortgages.
