When purchasing a home, it's important to know how much you can afford. With a pre-approval, you'll determine in advance how much you may be able to borrow and the best mortgage options for you. This will help prepare for your future budget. Also, being pre-approved shows the seller that you are a serious buyer.

Home inspections and home appraisals sound similar, but they have very different purposes.

Property appraisals look at the big picture of what affects a home's value. A leaking roof or foundation issues can definitely affect value.

A home inspector is a construction expert. Maintenance and convenience factors are more in line with home inspections. While these issues might not affect a home's value immediately, these problems can worsen over time.

Property inspections give buyers confidence that the home they're buying has been well maintained. While the lender doesn't require an inspection, it is recommended that you get one. It's your chance to ask questions, get answers and, possibly, negotiate repairs or a lower sales price.

At the time of your mortgage application, you will receive a Loan Estimate – a federally required notice that provides details of the cost of obtaining a mortgage loan and the terms of the mortgage loan for which you have applied.

A few days before closing, you'll get a detailed Closing Disclosure that breaks down the total and final closing costs. This allows you to gather your funds and confirm the details of your loan. You'll know the exact amount you need to bring to closing.

Your individual rate is determined by adjustments made to the base rate. These adjustments are driven by your credit score, loan purpose, occupancy type, loan-to-value, any discount points purchased and other factors.

Interest rates fluctuate. Inflation, retail inventory, consumer activity and employment determine what interest you pay on your mortgage loan. With a healthier economy more money becomes available, pressure on inflation increases and rates, generally, go up.

The Federal Funds Rate is what banks charge each other to loan money. That translates to other lending transactions, such as credit cards, auto loans and mortgages.

The Federal Reserve can change the rate up to eight times a year at Federal Open Market Committee meetings. When rates change, the Fed buys or sells government treasury bonds to change the level of money available to the financial markets and the public. This means a constantly changing table of base interest rates for mortgages.

Credit history is considered when applying for a mortgage loan. Your credit score, also known as a FICO® score, helps determine the types of home loans you can qualify for and affects your interest rate. To assess creditworthiness, lenders review your score to see how you've handled past credit obligations. This is a good indication of how you will handle them in the future. A higher credit score may help you qualify for a better interest rate and a lower down payment.

By law, you are entitled to one free credit report per year. Visit annualcreditreport.com or contact any of the following credit reporting agencies:

• Equifax​
• Experian
• TransUnion

DTI is the percentage of your gross monthly income that goes toward paying housing and debts. It is one way that mortgage lenders measure a borrower's ability to manage monthly payments and repay debts.

For example, if your mortgage payment and other monthly debts equal $1,000, and your monthly gross income is $4,000, your DTI is $1,000 divided by $4,000, or 25%.

A mortgage escrow account allows borrowers to pay ongoing property tax and homeowner's insurance costs within their monthly mortgage payments. These additional funds accumulate in an escrow account managed by M&T Bank, and we pay property taxes, homeowner's insurance and any mortgage insurance on your behalf from your escrow account.