Whether you want to quit renting or need a bigger place to live, buying a home is a top priority for many. But, if you’re like most Americans, you’ll need extra financial support. Fortunately, banks and other lenders make it possible with mortgages. If you’re curious about the home loan process, below are a few frequently asked questions about mortgage applications.

FAQ About Applying for a Home Loan

Is mortgage preapproval the same as getting pre-qualified?

No. Pre-qualification means that a lender or bank has offered an assessment of how much you can borrow. Preapproval gives you more strength as a buyer because it’s a committed statement of what your upper limits are. Being preapproved shows that you’re a serious buyer, as well as gives you a guideline of how much you can afford.

How are fixed and variable rates different?

Conventional mortgages generally have two categories: fixed and variable rates.

If you get approval for a fixed-rate mortgage, you’ll have the same interest rate throughout the life of the loan.

Variable rates are locked-in for a specific period—such as five years. At this point, the interest rate may increase depending on market conditions.

Initially, fixed rates will be slightly higher. But if you’re planning on a long-term loan and want to avoid changing market conditions, it can be the safer option. However, if you want to save on mortgage payments early on, a variable plan may be a better fit.

What mortgages are ideal for first-time buyers?

If you have a low credit score, you may not qualify for a conventional mortgage. But if you’re a first-time homebuyer, you may be eligible for an FHA loan. This is a government-sponsored loan that has minimal credit score requirements, offers reduced interest rates, and minimizes down payments.

How much should I save for a down payment?

If you’re getting an FHA loan, you only need to put down 3.5% of the home’s sale price. With a conventional loan, you should generally save up a down payment of around 20% of the purchase price.

If your down payment is less than 20% on a conventional or FHA loan, you may need to purchase mortgage insurance. USDA and VA loans don’t require down payments, but putting one down shortens the length of the loan.

If you’re looking to become a homeowner in Greenup County, turn to First & Peoples Bank and Trust Company for comprehensive support. Taking a personalized approach, this community bank will find a financing plan that fits your budget. This team can also introduce you to other lending solutions—including commercial and consumer loans. To learn more about the financial services they offer in Flatwoods, Greenup, South Shore, and Russell, KY, visit this bank online or call (606) 836-0211.