Frequently Asked Questions
7/24/2020 Meant for informational purposes only. Subject to change without notice Page 5 of 6
a. Purchasing a home is a big step. You will need a team of knowledgeable
individuals to help you through the process of selecting your home, determining
which mortgage loan best suits you, obtaining a mortgage loan, etc. A good
place to start is WHEDA’S Six steps to homeownership. In addition, review
“Renting vs. Owning” “The True Cost of homeownership”. In addition, a state-
wide approved counseling agency can assist you in the first steps of the home
buying process. Or, if you are ready to start shopping for a home, you will need
to select a WHEDA participating lender and a realtor.
•
How do I know how much home I can afford?
a. It is a good idea to meet with a WHEDA approved lender who can help you
determine a range of home prices that you may be approved to buy in. Lenders
will consider your income, how much debt you have, any assets you have or
own and your credit history before issuing a preapproval letter, which details the
amount they can purchase, providing their financial picture does not drastically
change during the home-buying process.
• How do I find the right lender?
a. When it comes to financing a home, it is a good idea to shop around for the
best mortgage terms, however that doesn’t necessarily mean the lowest rate.
Many buyers often start with their own personal banking institutions or credit
unions. You want to work with a lender that offers expertise and will help guide
you through the process. You should be comfortable and confident in the
lender you choose, so feel free to shop. Be sure to read WHEDA's Mortgage
Terms document to familiarize yourself with the different terms used in mortgage
financing. Use WHEDA's What to bring to your Initial Lender Meeting document
to help you be prepared and to understand the difference between
prequalification and preapproval.
• What is Mortgage Insurance or MI?
a. MI or mortgage insurance applies to conventional loans is something that
lenders use to protect themselves against a buyer who defaults on their home
loan. MI is money a buyer pays along with their principal and interest to
reimburse a lender in case they default. This fee is usually lumped into a buyer’s
monthly mortgage payment until about 78% of their home is paid off, at which
point MI can be cancelled.
b. Up Front Mortgage Insurance Premium (UFMIP) and Mortgage Insurance
Premium (MIP) apply to FHA loans. They are the same as mortgage insurance
except on an FHA loan Borrowers pay the UFMIP at closing or finance it into their
loan, and the MIP is paid monthly throughout the life of the loan
• What does a monthly mortgage payment cover?