1. Loan Pre-Approval – AKA the Pre-Approval
Buyers in this very tight market need to go through a vetting process called pre-approval. This form of financial vetting clarifies to the seller, the seller’s agent and the buyer’s agent that the prospective buyers can obtain a loan for a certain amount. This amount, plus down payments and other assets, offers a fiscal profile to the sellers that they can afford to buy the house.
Typically, the lender reviews several factors, including tax returns, credit score FICO, employment status, other assets, and other outstanding debts.
2. APR (Annual Percentage Rate)
Every loan charges various fees to provide the funding to purchase a home. These fees are usually based upon the amount borrowed plus other additional costs associated with the loan. The interest charged translates into the ‘cost of the loan.’ The purpose of the APR is to provide the borrower with a basic metric whereby he or she knows how much each lender is charging for the money. The APR is not the only fee that borrowers may have to pay, especially when purchasing a property.
3. Federal Housing Administration loan (FHA)
FHA loans are government-endorsed loan products.
4. Types of Loans
There are various types of mortgage loans made available to buyers.
The most common is the 30-year fixed-rate mortgage.
Then there is the 15-year and 10-year adjustable rate mortgage. The loan officer becomes valuable to the buyer in selecting the most appropriate structure that meets the needs of the borrower. The loan officer will take into consideration the necessary down payment and other fees. There are many loan products, and it would behoove the buyers to analyze the best one to go with. There are also programs available to first-time homebuyers to aid them in the purchase of their first home.
Conforming – The buyer will hear the term ‘conforming loan,’ which is a loan that conforms to Fannie Mae or Freddie Mac’s underwriting guidelines, and typically comes with the best interest rates.
As with any loan, the fee or rate the mortgage company charges may be fixed or adjustable, depending upon the kind of loan package.
Fixed-rate – This is where the rate charged by the lending institution does not change for the term of the loan.
Adjustable-rate mortgage (ARM) – This is where the rate charged by the lender DOES change based upon several factors, one of which is market demand and economic factors.
If you have any questions about this information or title insurance, please contact Ralph Aponte: 732.914.1400.
Counsellors Title Agency, www.counsellorstitle.net, founded in 1996, is one of New Jersey’s most respected title agencies, serving all 21 New Jersey counties with title insurance, clearing title, escrow, tidelands searches, and closing and settlement services for commercial or industrial properties, waterfront properties and marinas, condominiums, townhouses or residential single family homes. Counsellors Title also features its own Attorney Settlement Assistance Program™ [ASAP], which is an individual resource customized to fit the needs specifically of real estate attorneys, including, Documentation, Preparation, Disbursement of Funds, Attendance at Closing, HUD Preparation or Post-Closing Matters.