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[H546]Home Mortgage Pre Approval

by Brandon Cornett, Bra

What is Pre-Qualification?
Pre-qualification is an informal look at your income vs. debt to see how much of a mortgage loan you might qualify for. Pre-qualification does not take your credit into account, so it does not guarantee loan approval. It's just a quick review of your income and your debt -- the two factors that make up your debt-to-income ratio.

What is Pre-Approval?
Pre-approval means a mortgage lender has examined your credit and income much more thoroughly. When you get pre-approved, the lender will look at your finances as if they were approving you for an actual loan -- in other words, in great detail. This review will give you a good idea how much of a mortgage loan you can afford.

Here’s a more formal definition of pre-approval: The process of applying for a loan and obtaining approval for a maximum loan amount before having a purchase agreement.

Benefits of Pre-Approval
With a pre-approval letter in hand, you can be more confident that the lender will approve your actual loan (after you make an offer on a home). Being pre-approved also shows sellers you’re serious about, and capable of, buying their house. This can be a factor in hot markets where the sellers receive multiple offers.

For example, if you bid on a home along with three other prospective buyers, but you’re the only one who has been pre-approved by a lender, then you stand the greatest chance of having your offer accepted.

The sellers will be more comfortable with you since a lender has said, in essence, "Yes, this person is worthy of a home loan." The buyers without pre-approval, on the other hand, would be "unknown quantities" to the seller.

Keep in mind, however, that while a pre-approval is stronger than a pre-qualification, it's still not a guaranteed loan. After you make an offer on a home, the mortgage lender will once again review your finances and credit. They'll also have the house appraised. Only when they've approved of both you and the house will they make an actual loan commitment.

Conclusion
Pre-qualification and pre-approval are two different things. Think of pre-qualification as a quick review from the lender, and pre-approval as a longer and more detailed evaluation. Pre-approval will help you identify credit problems early on. Pre-approval also shows buyers you're serious about buying.

Therefore, it's a good idea to get pre-approved before you start the house-hunting process.

* Copyright 2006, Brandon Cornett. You may republish this article in its entirety, provided you leave the byline, author's note and website hyperlink intact.

The first step you take in order to get a home mortgage is filling in the application at the loaner you prefer to deal with and the process of financing the purchase of the home you have ever dreamed of can take up to several months. There are a lot of different ways to complete the formal request including in the office of the banking institution, on the World Wide Web and even by electronic mail. Regardless of the way used to fill the application it is essential to maintain record of the application to allow the application to be followed up upon by the borrower.

What does a home mortgage application contain? There are different elements of the home mortgage application which are to be filled at the moment of application. Here they are:

Financial Resource Information

All financial information including net worth, assets, liabilities, debt and the credit rating of the borrower enter the home mortgage approval process. Basically, the financial worthiness of the applicant will be determined by the combination of all this information.

Employment Information

Professional situation information reporting how long the employee has been a part of the company, the income earned through a yearly or monthly basis and employment stability will also be analyzed at this time.

Funds Information

Funds which are being provided to guarantee the acquisition of the house are carefully studied in the home mortgage approval process. The aspects analyzed include the first deposit for the home mortgage funded from wages, financial resources and other investment accounts.

Property Value Information

An additional step of the home mortgage approval process is that the financial institution will study the value of properties and compare them to the purchase price of the house. It is an influential element of the home mortgage approval process as the future monetary worth of the home will be calculated by the loaner.

Once the application has been appraised by the bank, the bank will generally come up with a number based on the amount of the salaries combined with the credit history and worthiness to repay the debt for the total amount which the home buyer is approved for. This number will make the home buyer able to look for potential homes within the budget or price range that is determined by their affordability.

How much can you afford for a home mortgage?

Actually lending institutions recommend to spend no more than two and a half times – these quantities are often taken into account when the home mortgage enters the approval forces.

Aside from the cost of the monthly payment, a lot of other points are considered in the home mortgage approval process. Many expenses about which you did not worry before being homeowner, increase the expenditure of the owner. Fees associated with property taxes, homeowners insurance in addition to higher bills for public services that will come with ownership of the property. It is essential for the future homeowner to become aware that ownership can cost more than the monthly payment – the approval procedure can shed light on this issue for a lot of potential homeowners.

A lot of homeowners seek pre-approval as it can adjust the finances and accelerate the process of hunting for a home. Pre-approval can cut down the time that it takes to have the agreement of the lending company and simply quicken the entire procedure. It is advised that all consumers become pre-approved with their loaner to make the home mortgage application process more easy.

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About Author

Both Brandon Cornett & Dominique Halet are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Brandon Cornett has sinced written about articles on various topics from Realestate Marketing, Home Buyers Guide and Real Estate. . Brandon Cornett's top article generates over 4400 views. to your Favourites.

Dominique Halet has sinced written about articles on various topics from Halloween Costumes, Finances and Family Concerns. D. Hallet bought a home as a single parent and knows how arduous it is to become a homeowner particularly if you don't know where to start. So, if you research more information on. Dominique Halet's top article generates over 2900 views. to your Favourites.