1. What is the difference between Pre-Qualified and Pre-Approved?
These terms refer to your status in the loan approval process. When you meet with a loan officer or mortgage company, they can estimate the price you can afford based on your credit, income and debts, as well as how much cash you have for a down payment. Pre-qualification is the determination of your probable ability to obtain a loan. Prequalification is the preliminary evaluation of your probable ability to obtain a loan. Pre-Approval means the mortgage lender has verified and approved your credit and income. Obtaining Pre-Approval early in the process will make your offer more attractive to the seller.
2. What is Earnest Money?
Earnest Money is a “good faith” deposit submitted with your offer to show the sellers that you are serious about purchasing their home. Earnest money is a required part of an offer but there is no set amount required. Sometimes the earnest money amount can make a difference during the negotiation process. Earnest money eventually becomes a part of the purchase and will show on the settlement statement as a credit to the buyers.
3. What are Closing Costs?
Closing costs are charges paid to various entities during the real estate transaction. These can include escrow fees, document preparation fees and lender fees.
4. What is a Point?
A point is equal to one percent of the loan principal. Some lenders charge points, in addition to interest and fees, at closing.
5. What is Title Insurance?
Title insurance protects against loss from any defects in the legal title, liens against the property or other adverse claims. The lender usually requires title insurance.