HOW IT WORKS

When shopping for a mortgage, you’ll find several types of lenders, each with its own advantages. Understanding these categories can help you narrow down your options: How to Pick the Right Lender: Comparing Loan Estimates, Fees, and Rates

Each lender type has its pros and cons. Consider what matters most to you—whether it’s local service, speed, special programs, or the lowest possible rate—and use these categories as a guide when exploring your options.

Don't confuse pre-qualification with pre-approval. While pre-qualification is a simple estimate, pre-approval requires a lender to verify your financial documents. A pre-approval letter proves to sellers you are a serious, qualified buyer—a must-have in today's market.

Getting Pre-Qualified is the "Estimate." It is a quick, informal look at your finances based on self-reported info. It’s a helpful starting point for your own budget, but it carries little weight with sellers because your data hasn't been verified.

Getting Pre-Approved is the "Verified Approval." It is a formal commitment from a lender after they verify your documents (taxes, pay stubs, bank statements) and run a credit check. You receive a pre-approval letter. This is essential in a competitive market; it proves to the sellers that you are a serious, approved buyer.

The Power of Your Credit Score Your credit score is your "trust rating." A higher score proves you are low-risk, which helps you lock in a lower interest rate. Even a small increase in your score can save you thousands of dollars in interest over the life of your mortgage.

The amount you need for a down payment depends on the type of loan and your financial situation. While 20% is a common benchmark, many buyers put down less—some conventional loans allow as little as 3%, FHA loans require just 3.5% and VA loans are 0% down.

Closing costs are the fees paid at the end of a real estate transaction to finalize the mortgage and transfer ownership. These typically include lender fees, title insurance, government recording fees, broker commissions and prepaid items like property taxes or homeowners insurance.

How much to expect: Closing costs generally range from 2% to 5% of the total purchase price. For example, on a $400,000 home, you might pay between $8,000 and $20,000.
The Bottom Line: These are separate from your down payment. Your lender will provide you with a Loan Estimate early in the process that breaks down these costs, so you are never surprised at the closing table.

Once your offer is accepted, the process typically takes 30 to 45 days to complete inspections, appraisals, and underwriting. Staying organized is the best way to ensure a smooth, on-time closing.