Homebuyer Education Part 3: Financing & Purchase

Pre-approval, mortgage basics, closing costs, timelines, and what to expect through closing.

In just a few minutes, you will understand the basic steps from pre-qualification to closing, the difference between prequalification and pre-approval, common mortgage terms, and the main categories of costs so you can plan ahead and avoid surprises.

Start here: the goal is fewer surprises

This page is a practical overview of what happens once you start talking to lenders and seriously preparing to purchase. It is not legal or financial advice, and exact requirements vary by lender, loan type, and the specific home/program you pursue.

If you are buying deed-restricted, being organized and responsive matters—because deadlines and documentation requirements can move quickly.

Step 1: Pre-qualification vs pre-approval (what’s the difference?)

These terms are often used interchangeably, and the exact meaning can vary by lender. The key difference is how much of your financial information has been verified.

Pre-qualification
Prequalification usually starts with a loan application. Many lenders will pull your credit and review proof of income to provide an estimate of what you may be able to afford. It can be helpful for planning, but it may not include full verification of assets or underwriting review.

Pre-approval
Pre-approval typically involves a more complete review of your financial profile. Your income, debts, credit, and assets are verified by the lender. In some cases, this deeper review may happen once you are under contract, depending on the lender’s process.

Pre-approval provides a clearer picture of your price range and monthly payment and strengthens your position when you are ready to move forward.

Questions to Ask Your Lender

  • What does your pre-qualification process include?

  • What additional steps are required for full pre-approval?

  • How long will my letter be valid?

  • What changes could affect my approval, such as new debt, a job change, or large deposits?

Step 2: Mortgage basics (plain-language overview)

A mortgage is a loan used to purchase a home. You repay it over time, usually with monthly payments.

Common mortgage terms you’ll hear

  • Principal: The total amount you borrow from the lender

  • Interest: The fee you pay to the bank for borrowing money, typically calculated as a percentage of your loan

  • PITI: Principal, Interest, Taxes, and Insurance (a common “all-in” monthly payment estimate)

  • Escrow: A managed account that collects funds for your property taxes and insurance as part of your monthly payment

  • Down payment: The upfront amount you pay at closing toward the purchase price of the home

Common loan types (high level)

Loan options vary by lender and by buyer situation. Many buyers hear about:

  • Fixed-rate mortgages: the interest rate stays the same over the life of the loan

  • Adjustable-rate mortgages (ARMs): the interest rate can change after an initial period

  • Other loan products may be available depending on eligibility and lender offerings

A lender can explain what options apply to you and what tradeoffs to consider.

Step 3: Closing costs (what to plan for)

In addition to your down payment, most purchases include closing costs. These vary by transaction, but often include categories such as:

  • Lender fees: Costs for processing your loan, such as origination and underwriting

  • Title and settlement: Fees for title insurance and the professional services that manage your closing

  • Prepaid items: Upfront payments for homeowners insurance, interest, and your initial escrow deposits

  • Inspections and appraisal: Fees for professional evaluations of the home’s condition and value (requirements vary by lender)

Pro Tip: Talk to a lender early to obtain a pre-qualification letter and request an initial estimate of your closing costs. This helps you plan your "cash-to-close," though keep in mind the list above may not be fully inclusive of all final costs.

Cash to Close: The total amount of money you need to bring to your closing appointment. This includes your down payment plus all closing costs, minus any earnest money you already paid.

Step 4: The homebuying timeline (what to expect)

Every transaction is different, and your individual timeline will vary based on your goals and the local market. The biggest factor you can control is organization: keeping a complete file and responding quickly to requests often reduces delays.

    • Build your budget and buyer folder to understand your price range and organize your documents

    • Pull credit reports and address any errors or issues early in the process

    • Talk to a lender about obtaining a pre-qualification and understanding your financing options

    • Watch listings and clarify specific program requirements for the homes you are interested in

    • Submit required documents by the deadline(s) to ensure your application is considered

    • Work with professionals to prepare and submit a competitive offer when you find the right home

    • Inspection period to evaluate the condition of the home (if applicable)

    • Appraisal which is typically required by your lender to verify the home's value

    • Final lender conditions and any last-minute documentation needed for loan approval

    • Closing disclosures and signing to finalize the purchase and receive your keys

    Pro Tip: While the first two phases can take as long as you need, the "Under Contract" phase moves quickly. Most transactions aim to close within 30 to 45 days once an offer is accepted.

Common pitfalls that slow buyers down

  • Missing documentation pages (incomplete files cause delays)

  • Waiting to ask questions about program steps until the deadline is close

  • Not submitting an offer on an active listing

  • Confusing prequalification with pre-approval

  • Budgeting for the mortgage only (not taxes/insurance/HOA/maintenance)

  • Moving money between accounts without documentation (paper trail matters)

  • Taking on new debt during the process (can change DTI and approval terms)

  • Waiting to ask questions about program steps until the deadline is close

  • Assuming a listing guarantees eligibility or approval

What happens after closing (high level)

Buying is not the end of the process, especially for deed-restricted housing. After closing, there may be ongoing requirements related to:

  • Occupancy rules (living in the home as your primary residence)

  • Compliance steps (depending on the home or program)

  • Resale rules and price restrictions (for deed-restricted homes)

If you’re pursuing deed-restricted ownership, make sure you understand the deed restrictions for the specific home you are buying.

Action plan

Now that you understand the basics of financing, costs, and timing, take a few practical steps to stay organized and move forward at your own pace.

  1. Talk to a lender about the difference between pre-qualification and pre-approval, and ask what they specifically need from you to build a pre-approval plan.

  2. Request a rough estimate of your monthly payment (PITI) and closing cost categories so you can begin planning your total cash-to-close.

  3. Complete your homebuyer education early if you are pursuing deed-restricted housing, and keep your buyer folder organized as you go.

  4. Connect with The Valley Home Store (TVHS) for class and listing support if you have not already done so.

TVHS homebuyer classes

TVHS deed-restricted listings

Next steps

Choose the next move that fits you.