Mortgage Pre-Approval Tips What You Need to Know
Perhaps the most flawed understanding about a mortgage pre-approval is that it is a lender?s guarantee of financing. A mortgage pre-approval process entails a mortgage lender reviewing a borrower?s credit and financial situation so as to determine the amount and rate of mortgage to be advanced to the borrower. The fine print contained in a mortgage pre-approval document shows that the mortgage terms are contingent upon the qualification of the borrower and the respective property. As such, a mortgage pre-approval can simply be deemed to be a rate hold and not an absolute guarantee of financing.
Here are some tips about getting pre-approval for a home loan.
Getting A Substantial Pre-Approval
The ultimate value derived by mortgage lenders from a mortgage pre-approval is assurance that potential borrowers qualify for certain mortgages. Borrowers in turn also get assurance that they can afford certain property. While the assurance gotten from a mortgage pre-approval cannot be absolute for both the lender and the borrower, a higher level of assurance is often preferred to a lower level of assurance. Higher levels of assurance can only be enjoyed when the mortgage agent submits a borrower?s pre-approval after conducting substantial review of the borrower?s goals, credit and financial situation. A good mortgage agent would therefore perform a more conclusive enquiry of a borrower?s financial background obtain sufficient supporting documents.
Benefits Of Mortgage Pre-Approval
A mortgage pre-approval is a first and often not always necessary step in the mortgage application process. The actual mortgage qualification often starts when the mortgage applicant is taken through a preliminary review in the pre-approval stage. The second phase entails reviewing the specifics of the actual property. This second phase, as you would expect, is often more challenging at the preliminary stages since it is difficult to come up with accurate figures regarding the actual property if there is no specific property chosen yet.
While a mortgage pre-approval process is not a compulsory requirement among many lenders, it has several benefits:
1. Compiling Documentation Ahead Of Time
Firstly, the mortgage pre-approval process forces prospective borrowers to obtain and compile the necessary mortgage documents well in advance. No one likes to frantically run around looking for crucial documents at the very last minute.
2. Accurate And Relevant Information
Secondly, mortgage pre-approval documents first pass through mortgage brokers who ensure that the information in the documents is accurate and relevant to the mortgage application process. As such, only accurate and relevant information get to the mortgage lenders thereby reducing the time and cost of the mortgage application process.
3. Getting A Mortgage Product Right For The Borrower
One of the main reasons why a pre-approval is appealing to mortgage borrowers is that it is not binding. Therefore, buyers can choose not to commit to the real deal. This way, buyers can back out of a deal should the mortgage product not fit their needs. Most lenders fix expiry periods ranging from 30 days to 6 months (or longer) for pre-approvals. For example, a mortgage lender can fix a 5 percent pre-approval rate for 30 days. To be eligible for that 5 percent rate in this case, a buyer has to close the deal before the expiry of the 30 days. Most lenders have a policy that if their rate drops during a buyer?s rate hold, the buyer would be eligible for that lower rate provided his or her broker/agent submits a request for the same.
You can go direct to a bank to get a pre-approval however remember you most likely won’t have the same knowledge and experience as a qualified mortgage broker who will know a lot more about each bank product and how best to apply based on your current financial situation. A bank typically can only recommend their own products and may not be able to give you any kind of financial advice about any tax implications or debt structuring strategies for wealth creation. So seek the advice of a mortgage specialist before you consider apply for any kind of home loan.
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