Confused about what getting pre-qualified, pre-approved or loan commitment means? You’re not the only one. There’s a big difference between a mortgage pre-qualification, a pre-approval and an actual mortgage approval. The differences can affect your home buying transaction. It's important to get pre-approved for a mortgage before you shop for a home, but sometimes the terminology is confusing. Start the process now at http://coastalhomeloanspecialist.com
Pre-Qualified, Pre-Qualification
Loan pre-qualification does not typically include an analysis of your credit report or an in-depth look at your true ability to buy a home. You can be pre-qualified by a lender, by a real estate agent or you can do it yourself. The term means that someone has taken a general look at your income and expenses and plugged them in to a debt-to-income ratio formula.
Pre-qualifying yourself with a lender before you start looking for a home gives you a general idea of the price range you can afford. It will not nail-down an interest rate for you, and that factor and others affect the monthly payments a bank will allow you to make. With a pre-qualification, no information has been verified. If you receive a letter from the lender, it may only state that you are likely to be approved for a mortgage.
Pre-Approval
A pre-approval goes one step further than a pre-qualification does. When you are pre-approved for a mortgage, it means a lender has looked closely at both your credit report and your income and determined that you qualify for a loan. The lender will tell you the maximum amount of loan it will make, which loan programs you qualify for, and will discuss the interest rates it will offer for different types of loans.
When you're pre-approved you can go shopping for a home with confidence about your buying power, but it still isn't a guarantee that the lender will approve the loan.
Loan Commitment
A formal offer by a lender making explicit the terms under which it agrees to lend money to a borrower over a certain period of time. Loan commitment is issued after it has approved both the house and you.
A home appraisal must meet the lender's guidelines, which usually includes a stipulation that the home must appraise at or higher than the sales price. Price is just one aspect of the home the bank considers. Other requirements A Title Search, Credit Report checked again, Proof of Insurance.
The loan commitment letter is issued only when the bank is sure it will lend, so if you must put a loan commitment date on your offer to purchase be sure it provides plenty of time for the bank's requirementsTeamwork Mortgage Really Can Fund in 10 Days!
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