Mortgage Approval

You must have a pre-approval letter to submit an offer. In our competitive real estate market sellers want to know that buyers can afford to purchase their property before they will accept the buyer's offer. We provide all our buyer's free access to our mortgage banking experts.

• It strengthens your offer to the seller. Most sellers will not
  consider an offer that does not have a pre-approval.
• During the pre-approval process our mortgage banking team
  will also review your financial plan and prescribe a mortgage strategy
  that fits your specific situation.
• You will know exactly how much you are approved for. It’s no fun
  to find your “ideal home” and then find out you can’t afford it.
• You can accurately estimate your down payment and closing costs.
• If you are a first-time buyer, you may be able to qualify for special
  first-time buyer programs which may allow you to afford more homes for
  your money.
• This process gives you time to arrange for a co-borrower or co-signer
  for your loan (if needed).

Pre-qualification

This is when a lender has verbally taken in your information and approved you as a buyer. This still does not mean that you are approved for a mortgage. Many lenders offer pre-qualifications. Pre-qualifications are considered sub-standard as they do not provide sellers with any assurance that the bank will issue a loan.

Pre-Approval

This is when a lender takes your documented financial information and runs it through the bank's underwriting process. Thus, a buyer's information is compared to the bank's lending guidelines and conditions. This is a more thorough process than a pre-qualification and means that a buyer has documented their ability to obtain a mortgage.

Your monthly mortgage payment is made up of several components. This housing expense is commonly referred to as “PITI” or principal, interest, taxes, and insurance. PMI (see below) and homeowner’s association dues may also make up a portion of your total payment.

Principal

The original balance of money was loaned, excluding interest. Also the remaining balance of a loan, excluding interest. The interest is calculated on the principal.
InterestThe percentage rate charge for the loan amount.

Taxes

The county assessor charges property tax based on the value of your property. Two tax installments are due each year. The first installment is due November 1 and is delinquent on December 10. The second installment is due February 1 and is delinquent on April 10.

Insurance

A contract that pays for the loss of property from certain hazards, including fire. You obtain property insurance from an insurance agent. The standard policy pays replacement costs, minus depreciation based on actual cash value. Talk to your insurance agent about the different types of insurance available. Hazard insurance may be impounded.

PMI (Private Mortgage Insurance)

Depending on the amount of your down payment, you may be required to have PMI. Anything less than 20 percent may require PMI. Because loans with small down payments involve substantially more risk for the lender, they need protection in case the loan goes into foreclosure. Because this insurance is available, lenders can offer loans with lower down payments.

PMI may require an up-front fee which is payable as part of your closing costs and is also required to be paid monthly with your payment. The cost of PMI varies according to the amount of your down payment.

FHA (Federal Housing Administration)

Charges a fee for mortgage insurance called MIP or Mortgage Insurance Premium. An up-front fee (which may be financed) and a monthly fee are assessed. VA (Veteran Affairs) charges a funding fee, which may also be financed.

Note: Taxes and insurance may be impounded, depending on the amount of your down payment. Anything less than 20 percent down may require an impound account. An impound account is a trust account set up by the lender. A portion of the monthly payment is credited so that funds will be available for the payment of taxes and insurance. This way, the lender actually pays your tax bill for you.