As you start the home buying process, you may hear terms that can be confusing and unclear. Let me explain some of the terms you’ll need to know:
Pre-Approval: A pre-qualification means you meet the general lending guidelines for receiving a loan. However, a pre-approval goes a step farther: the lender works with you to determine how much you can afford based on your financial situation and gives you a specific loan amount. A pre-approval can help you compete with cash offers in a competitive housing market because some sellers don’t accept offers that aren’t pre-approved.
Earnest Money: Though earnest money is being used less and less, this is money you will need that shows a seller you are committed to purchasing a home. This money is a fraction of the down payment and, once the contract is signed, goes towards funding the down payment.
Escrow: Escrow is an account kept by a third party that will hold onto your earnest money while you negotiate with a seller. This ensures that the funds and the property aren’t exchanged until all terms and conditions are met by both sides.
Underwriting: Underwriters analyze the documentation you’ve provided in your loan application and verify that the loan program you’ve applied for is the correct one for your needs.
Pre-paid Interest: Pre-paid interest is payment for any interest that accrues after the date you close your loan and the date of your first monthly mortgage payment. This cost is due when the loan closes.
I know the process can be confusing, so don’t hesitate to contact me with any questions your have. I am happy to help! 501.229.7145