Lenders' Learning Corner

Bank of Lake Mills works hard to educate our customers about a variety of topics.
Each month, our lenders will answer common lending-related questions that you may have! 

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What is a pre-approval?

Borrowers should start the home purchase process by getting pre-approved by a mortgage lender. Pre-approval is the process of working with a mortgage lender to determine if a person is financially eligible to finance the purchase of a home. A few reasons a person should get pre-approved are:
  • Pre-approval lets the buyer know how much home they can afford, so they can find their dream home within their budget.
  • Realtors expect a pre-approval letter to make sure they're showing a home to financially qualified clients.                                     
  • Pre-approved home buyers are more appealing to sellers.
  • The pre-approval process brings any eligibility concerns to the forefront, so any concerns can be addressed in advance.                               
  • Pre-approval educates the borrower on various loan programs that are available to them. 
Being pre-approved puts the customer in the best spot to be ready for home purchase. It prepares them with what their budget is and what payments would look like at different home price points. Buyers are prepared to win an offer before they even begin shopping for a house.

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Where do I start if I want to purchase a home?

When looking to purchase a home, the first thing you need to decide is if you are ready to be a homeowner. Some questions you should ask yourself are:

  • Have you saved a large enough down payment?
  • If you are paying rent now, how much of a difference would a house payment be from your current rent? Are you able to comfortably afford this change?
  • Would you be able to keep up with the maintenance and upkeep of a home?
  • Are you ready to move?
Perspective homeowners should contact a mortgage lender. They can help you determine if you have enough saved for a down payment, qualify for a loan, and how much home you can afford. Lenders can help find the loan program that best fits your situation. They will be able to explain this to you and work to get you pre-approved. Once you have the pre-approval letter you are ready to start working with a realtor that can help you find the house of your dreams!


How much down payment do I need? Can the funds be borrowed?

The amount of money needed for a down payment will vary depending on your situation; this is something you can explore further with a lender when considering what loan programs are applicable to you. Some programs require less than 5% down, so a 20% down payment isn't always necessary. Funds can be gifted to you from family members in certain circumstances as well. Your lender will be able to help you navigate through different scenarios to find what is most beneficial to you and your situation.

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