BUYER QUESTIONS & ANSWERS
Q: What is the
difference between "pre-qualified" and
"pre-approved"?
A: If
you are "pre-qualified" you have
determined, with a loan officer, what price you
can afford based on the down payment, your debts
and the amount the mortgage company will approve
for your mortgage. Being
"pre-qualified" is only a determination
of your probable credit. If you are
"pre-approved", your credit, employment
and funds have been approved by the lender.
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Q: What
are closing costs?
A: Closing costs are
an accumulation of charges paid to different
entities associated with the buying and selling
of real estate. For buyers, they are usually
about 4-6% of the total sales price of a
property. Some of the closing costs you might
encounter are: application fees, appraisal fee,
city taxes, credit report, documentation fee, homeowners'
association fees, loan fees, mortgage insurance,
origination fees, tax registration and title
insurance premium.
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Q: What
is a point?
A: One point is equal
to 1% of the new loan amount. Whenever Government
regulation, Provincial laws and/or competitive
practices prohibit the lender from charging a
rate of interest that would make the real estate
loan competitive with other fields of
investments, the lender must seek some method of
increasing the yield for the investors. By
charging "points", the lender can bring
the real estate loan up to those other
investments.
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Q: What is earnest
money?
A: When you make an
offer, you will need to put up an earnest money
deposit as a sign of good faith that you are
seriously interested in buying the home. That
deposit becomes a part of the purchase price and
is held in a trust account until there is full
acceptance of the offer. Typically, an earnest
money is 3-5% of the offer amount.
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Q: What
is title insurance?
A:
Title insurance protects the named insured
against loss because of defects, liens,
encumbrances, adverse claims or other matters not
shown or disclosed to the new owner that attach
before date of policy.
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