Frequently Asked Mortgage Questions
Does the term 'amortization' leave you perplexed? Are you unsure how preapproval differs from prequalification? If so, you're not alone. Here are some mortgage basics to help you become more familiar with the process.
What's the difference between prequalification and preapproval?
Getting prequalified is often the first step when searching for a home. You supply 'basic' financial information, such as your income, assets and debts, and the lender then provides a preliminary estimate of the amount for which you may qualify.
Preapproval involves an in-depth look at your finances and usually requires an application fee, but this process brings you closer to determining your potential interest rate and monthly payment. Your credit worthiness is also considered. Being preapproved also puts you in a better position in a competitive market because it shows you have your finances in order.
What is amortization?
Amortization is the process of paying off a home loan's principal and interest over time within a consistent, planned repayment schedule, usually 25 years or more. In the beginning, a large portion of each payment goes towards interest, but as the loan matures, larger amounts go toward paying down the principal.
What types of loans are there?
Fixed and Adjustable rate mortgages operate as their respective names imply. The 'fixed' has a rate that stays the same for the term of the loan. The 'adjustable' rate may start low, but it can fluctuate up or down after a predetermined period, or depending on market conditions.