Financing and Insurance
Preapproval is different from prequalification, which is merely an estimate of what you may be able to afford. Preapproval occurs when the lender has reviewed your credit and believes that you can finance a home up to a specific amount based on collected preliminary information. However, neither preapproval nor prequalification represents or implies a commitment on the part of a lender to actually fund a loan. Following are some of the current documents you need to get started on loan preapproval:
  • Income
    • Current pay stubs
    • W-2s or 1099s
  • Assets
    • Bank statements
    • Investments or brokerage firm statements
    • Net worth of businesses owned (if applicable)
  • Debts
    • Loan statements
    • Alimony or child support payments (if applicable)

ANTICIPATING YOUR COSTS
Review the following information to anticipate the costs involved in buying a home. It is only a partial list; for more detailed costs, ask your realtor to help you create a worksheet that can be updated as necessary.

Estimating Buyer’s Fees
Called loan origination or a loan service fee, buyer’s fees can be up to 3 percent of the loan amount and can include the following:
  • Loan application fee
  • Lender’s credit report
  • Lender’s processing fees
  • Lender’s documentation-preparation fees
  • Lender’s appraisal fees
  • Prepaid interest on loan (prepaid per day until the end of the month in which the closing occurs)
  • Lender’s insurance escrow (up to 20 percent of the cost of a one-year homeowner’s insurance policy)
  • Lender’s tax escrow (depending on time of year, up to 50 percent of annual property taxes)
  • Lender’s tax escrow service fee (to set up the tax escrow)
  • Private mortgage insurance (PMI)
  • Title insurance cost for lender’s policy (depending on location, a portion or full amount may be paid by the seller)
  • Special endorsements to the title (lender may require the buyer to pay special endorsements, such as environmental lien or location)
  • House inspection fees (any that remain unpaid)
  • Title/escrow company closing fee
  • Recording fees for the deed or the mortgage
  • Local city, county and state transfer taxes (vary by location)
  • Flood certification fee (to determine whether home is in a flood plain)
  • Buyer attorney’s fee
  • Association transfer fee
  • Condo move-in fees
  • Co-op apartment fees (to transfer shares of stock in the property to the buyer)
  • Credit checks by the condo or co-op board

CREDIT UNIONS
Many people shopping for home loans forget to inquire at credit unions. There are two major differences between a traditional bank and a credit union. One difference is that credit unions are member-owned, meaning that if you have an account at a credit union, you’re part owner in the enterprise. Being a member can translate into better service since you are more than a customer. The other difference is that credit unions are not-for-profit, which explains why mortgages and interest rates tend to be notably better. Becoming a member is easier than typically believed; you can use the credit union search tool at
www.JoinACU.org to find a local branch.

   
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