Mortgage Info for Minnesota Home Buyers and Sellers

Why do I need mortgage pre-approval?

Pre-approval involves applying for a loan and being approved by the lender before you choose a home. This is the same as a typical mortgage application process, except that the property itself is not considered. It will probably be dependent on certain qualifications of the home itself (such as appraisal value, and whether it lies in a flood zone) before closing. The advantage is that sellers know that you are serious about your inquiry and able to purchase the home, which may make them more willing to offer a better price or conditions of sale.  You also know ahead of time exactly how much you are able to spend and won't waste your time looking at homes that you will not be approved for in the end.

What different factors will the lender look at when I apply for a mortgage?

Lenders may consider many different factors and few are the most important. Starting with your income and expenses. Most lenders will need to know how much money you have available, and other expenses your income must cover, to decide how much they think you can pay for your mortgage. Next, your credit will factor in. Having late payments in your credit history will not necessarily disqualify you from a mortgage, it may decrease the options to choose from however. The reason the lender is interested in this information is to determine how likely you are to repay your mortgage. lastly, the property you are considering is a factor in securing your mortgage, because the property itself will serve as physical collateral if you fail to repay it.


If I have a bad credit history will I be able to buy a home?

Credit history is an important factor under consideration when you apply for a mortgage, but there are many other factors. Some mortgage lenders have programs available for those who have had credit problems. So it is possible for those with problems in their credit history to secure a home loan. Before you become too concerned with bad credit, it is a good idea to learn more about your credit. In the past I have encountered people who thought they had bad credit, but turned out they had great credit.  


What is locking the mortgage rate?

To "lock" the interest rate, it means you are going to guaranteed the current rate even if you are not ready to close your loan. Often the loan can be locked for at least 30 days before closing and sometimes up to 60 days. Knowing when to lock your mortgage rate is impossible to predict, so a bit of luck does play into this factor. 

 

For additional questions feel free to contact Sarah

 

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