Before you begin looking for a home and before you talk to a lender, it's a good idea to understand basic lending vocabulary.

PRE-APPROVAL VS. PRE-QUALIFICATION
Pre-Approval is a commitment from a lender for your loan, usually subject to certain conditions including appraisal of the property, the preliminary title report and a satisfactory purchase contract. A lender's pre-approval is based on verification of your credit, employment, and current financial picture. A pre-approval letter submitted with a contract makes any offer more attractive and can easily be the deciding factor in cases where there are multiple offers.

A lender's pre-qualification is not a commitment but is the lender's estimate as to how much they will lend you. The lender considers your stated income, assets and expenses and calculates the price range of the home you should be shopping for. Pre-qualification is the minimum you need to be viewed as a serious buyer and can sometimes be done over the phone.

CREDIT REPORTS and CREDIT SCORES
Credit reports come from companies which tabulate data submitted by banks, credit card issuers, finance companies, etc, regarding an individual's borrowing history.

Credit scores determine the "credit worthiness" of a borrower, based on an automated formula. Lenders use credit scores as a guide for deciding how much money to lend you and at what interest rate.

DEBT RATIO
Lenders also use debt ratios to determine how much they're willing to lend. The percentage of your gross income that goes to pay off long-term and revolving debt is your debt ratio. The debts considered include your mortgage, property taxes and insurance, car payments, credit card debts, etc.

POINTS, ORIGINATION FEES, and MORE
A "point" is one percent of the amount borrowed. Points are paid by the borrower as a cost of the loan. A loan origination fee is a specified amount the lender charges, sometimes instead of points and sometimes in addition to points. You can also expect to pay for some incidentals such as property appraisals. Most lenders offer a trade-off between points and interest rates. You can pay more points to get a lower interest rate and vice-versa.

• Pay stubs and proof of employment
• Proof of other sources of income
• Bank statements
• Tax returns
• Credit reports (they will order these on their own)
• Profit and Loss statements for self-employed

LOAN BROKERS and DIRECT LENDERS
Lenders come in 2 varieties. Some, like banks, lend direct to the customer, offering different loan programs through their institutions.

Loan, or mortgage, brokers work independently with numerous lending institutions. They can match you with many different loan programs.

NEED A GOOD LENDER?
Good lenders are often busy, especially when rates are low. You may want to consider talking with more than one lender before making your selection. Your needs will determine which lender is right for you. Our agents have worked with many good lenders and can confidently recommend some for you. That's part of our excellent service. Please send us an email or call us at 800-900-6058 or just drop in and we can discuss the details.

Have questions? If so, please contact us!