Homebuying FAQ

Homebuying FAQ

Homebuying FAQ:

What is the difference between Pre-qualification vs Pre-approval?

Mortgage pre-qualification and pre-approval are very different, despite sounding quite similar.

A pre-qualification tells you the amount of mortgage that you may qualify for and is based on unverified information that you provide. Some mortgage professionals believe pre-qualification is virtually useless.

A pre-approval letter from a lender shows that you qualify for a specific mortgage amount based on an underwriter’s review of your actual financial information, such as your outstanding debt, credit history, income and assets.

Do I have to pay a commission to my real estate agent?

Homebuyers NEVER pay a fee to the real estate agent. The compensation comes from the seller when the transaction is complete. PCDC recommends that buyers use a good experienced real estate agent. This agent is legally obligated to represent your interest.

Should you pay upfront fees for a mortgage?

The only upfront fees that you should expect to pay a lender are: 1) application fee; and 2) credit report fee. Other fees are paid later if you decide to obtain the mortgage.

What if I have a low credit score?

Homeownership is possible with a lower-than-prime credit history; however, you will face a higher interest rates and fees. PCDC’s counselors can show you how to increase your credit score.

Warnings, tips and resources

  • Shop for a mortgage. Go to three lenders: 1) ask for a pre-qualfication; 2) obtaina breakdown of interest rates, fees and points; 3) decide if you like the lender. (See the CFPB article “What do I have to do to apply for a mortgage loan?”: http://1.usa.gov/1PanOan.)
  • Check your credit report. Before you start shopping around, request free copies of your credit reports at www.AnnualCreditReport.com or 877-322-8228. Check the reports for errors and follow the directions to dispute inaccurate information.
  • When you are ready to apply, know your score. Ask lenders to provide you with your “mortgage credit score,” a specialized number used by lenders in the loan application process.
  • Seek help from a HUD-approved housing counselor. Learn the size of the mortgage you qualify for and how to obtain a home loan without risky features that might result in delinquency or foreclosure. To find a local counselor, visit www.consumerfinance.gov/find-a-housing-counselor/. PCDC is HUD-certified Housing Counseling agency. For appointment, please call 215-922-2156.
  • Be aware that mortgages with conditions that expose borrowers to risk of default are still legal. Avoid mortgages with high-risk features, such as interest-only payments, high debt-to-income allowances and balloon payments.
  • Beware of scams. The only upfront cost for mortgage application are application fee and credit report fee. If you decide to obtain a mortgage and are ready to settle on the purchase of your house, you will receive a loan estimate, closing cost disclosure form and all other documents required by law. (See the CFPB’s “What documents should I receive before closing on a mortgage loan?”: http://1.usa.gov/22hQfQl.)
  • Report problems with mortgage lenders or servicers to the CFPB. The Bureau accepts complaints at www.consumerfinance.gov/complaint or at 855-411-2372.
  • Notify state authorities about your mortgage complaints. Find your state’s attorney general at www.naag.org. Find your state’s financial regulator at www.nasaa.org.

Get tips for the entire home buying-process:

  • Visit the CFPB at www.consumerfinance.gov/owning-ahome/ for access to tools and resources to help you make the best choices throughout the mortgage application process.
  • Attend PCDC’s monthly Homebuying Education class