From setting up an escrow account to purchasing title insurance, it takes many steps for buyers to close on a real estate deal. However, while each step is important, none will be as impactful as the mortgage itself. Having a home loan helps ensure you can purchase a property and can have a lasting impact on your future finances if you’re a buyer. If you’re buying residential real estate for the first time, here are a few frequently asked questions about mortgages that you should review.
FAQ About Home Loans
What is pre-approval, and why is it important?
Before you start searching for homes, meet with a bank or another trusted lender to get pre-approved for a mortgage. This pre-approval demonstrates that you can acquire financing up to a certain amount—and it can show sellers that you’re serious. Pre-approval will also show you how much funds you can qualify for, allowing you to refine your search to properties that fit within your budget.
How can you improve your chances of approval?
Your credit score will help lenders gauge your level of financial responsibility. If you have a low score, review your credit report and resolve any issues that are hurting your borrowing ability. At the same time, you should save up an appropriate down payment of about 10 percent of the total purchase price. If you save more, your lender may allow for more favorable mortgage terms.
How do adjustable-rate and fixed-rate home loans differ?
Fixed- and adjustable-rate mortgages are two common lending options for prospective buyers. In the instance of fixed-rate, a mortgage carries the same interest rate throughout the life of the loan. Adjustable-rate mortgages lock in a low rate for a specific period but can change considerably after that period has passed. Typically, adjustable plans help buyers initially save on interest, but they can become more expensive if the market changes.
What if you don’t qualify for a traditional mortgage?
First-time buyers typically use FHA loans to receive lower rates, while also incurring lower credit and down payment requirements. VA loans are similar but are reserved for veterans and can eliminate down payment responsibilities.
How does title insurance prevent mortgage-related losses?
If issues show up after the original title search is conducted and the house closing is completed, buyers may face challenges maintaining their status as the rightful property owner. Title insurance protects both the lender and the buyer by covering certain losses that may arise from these situations.
When you want to plan for a successful house closing, turn to the professionals at All Points Title & Closing. Serving the Hamilton, OH, community for more than 30 years, this office simplifies real estate transactions with their reliable title search and title insurance services. Committed to client education, this team will work closely with you to ensure all your questions and concerns are addressed before closing. Visit this Cincinnati-area title company online or call (513) 863-7600 to speak with a friendly agent.