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Nearly 75% of Americans Are Confused by Closing Costs, Preapproval or Other Homebuying Steps: Here’s a Helpful Cheat Sheet – GOBankingRates

gradyreese / Getty Images <…….

gradyreese / Getty Images

Most likely, unless you’ve already bought a home or work in real estate, you don’t feel like you know a ton about what it takes to buy a house. At least, that’s the norm for many Americans according to a recent GOBankingRates survey.

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Of the 1,000 people across the country who were surveyed, only 26% felt they understood the homebuying process well. The most confusing part of the process to those surveyed was getting preapproved, followed by closing costs. Here’s a quick explainer on the most important parts of buying a home that you might not know about.

What does it mean to get preapproved to buy a home? 

Unless you’re paying all cash for your home, you’ll need a mortgage to buy a home. The preapproval is referring to being approved for a mortgage. Obtaining preapproval lets sellers know you have a line of credit ready to buy a home.

To get this preapproval, you’ll need to get in touch with a lender when you start the homebuying process. The lender will check your credit, your assets and income, and verify your employment. The lender will then approve you for a certain amount of money based on all of these factors. For credit, most lenders are looking for a 620 credit score or higher. If you have a lower score, you might have to make a bigger down payment on the home you buy. 

The lender will then draw up a preapproval letter with the amount you are approved for. This preapproval documentation expires after 60-90 days. Some real estate agents showing the homes you look at might require a preapproval letter to view the home, so you’ll want to keep it current.

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Which type of mortgage should you get?

In the GOBankingRates survey, 14% of respondents said they were confused by what mortgage to get. It makes sense that people would be confused, since there are six types of mortgages to choose from:

Conventional Mortgages

If your lender has determined you have good credit, recurrent and steady income, and can make a 3% down payment on a home, you can get a conventional loan. These are typically backed by Freddie Mac or Fannie Mae, which are two government sponsored companies that handle most conventional mortgage loans. 

Conforming Mortgage Loans

These loans have to conform to maximum loan limits set by the federal government. The loan limit for 2022 is $647,200 …….


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