What is pre-approval?

What does it mean to be pre-approved for a mortgage?

Answer:

Pre-approval is a lender assessment that you are suitable for a specific mortgage/loan. To get pre-approved you will need to set an appointment with your lender (a bank, mortgage broker, etc.), complete a loan application, provide financial documentations for evaluation (tax returns, bank statements, business licenses, etc.) and pay some fees for them retrieve your credit reports and process the approval.

After a thorough investigation of your file and approximation of the interest rate, home insurance, and property taxes, the lender will produce a letter that attests that you have the funds to afford a property in a specific price range.

This letter is not a 100% guarantee that you will get that loan, but it is an advantage over others buyers because it gives proof to the seller that you have financial backing and that you are serious about buying a house.

It is suggested to repeat this step with a few lenders (or a mortgage broker so as to minimize the impact on your credit score from each credit check - only one credit check is required with a mortgage broker) so you can compare terms among them and use this competition to help you negotiate a better mortgage.


Views: 2765        Posted on: May 16 2012        Tags: Mortgage