Understand the Difference Between Prequalification and Preapproval

2024-06-25T00:15:34-05:00

Have you been prequalified for a mortgage loan? Or preapproved? Are they the same? While both are steps in reaching homeownership, they have different meanings. What’s Prequalified? Prequalification is an informal process. You describe your financial situation—debt, income, and assets—and the lender estimates how much you may borrow. The lender may even consider a credit check, a soft one that should not affect your credit score. This process can occur over the phone, online, or in person. Becoming prequalified can prepare you for the next steps in buying a home and help you explore your mortgage options. What’s Preapproved? You will provide your lender with proof of your financial history. The lender will check your income, employment status, assets, debt, and pull a credit report on you. Documentation for this process can include W-2s, pay stubs, a summary of assets, and a copy of your mortgage statement if you already own real estate. Preapproval can be completed online with support from a loan officer if needed. If you get preapproved, you will receive a letter outlining the amount and type of mortgage the lender is offering along with terms. Preapproval is vital to the homebuying process. If you are considering buying a home, prequalification and preapproval will show you your borrowing options. That information will also help your REALTOR® understand what you can afford.

Understand the Difference Between Prequalification and Preapproval2024-06-25T00:15:34-05:00

Which Mortgage is Right for You?

2021-07-20T01:17:36-05:00

When shopping for a mortgage loan, one size does not fit all. It’s important to understand your options and how they will affect your budget. Adjustable vs. Fixed One key decision is whether to select a fixed- or adjustable-rate loan. A fixed-rate mortgage keeps the same interest rate for the life of the loan; your monthly payments of principal and interest will not change. Because of this stability, fixed-rate mortgages can help you plan your finances far into the future. They also can be attractive when you’re able to lock in a low rate in a volatile market. An adjustable-rate mortgage typically offers an introductory period—for example, five years—with a rate lower than you could get with a fixed-rate loan. After this period, the rate adjusts annually based on the financial markets. Adjustable-rate mortgages can be a less expensive option if you don’t plan on living in a house for very long. You can also take advantage of falling rates without refinancing. Of course, if rates climb, you could owe more in later years. How Long? You may think that a 30-year mortgage is your only option, but 15-year mortgages are also available to many borrowers. The overall cost of a mortgage will be less over 15 years than 30 years—the shorter term means less total interest—but the monthly payments are higher. If you can afford to pay off the mortgage sooner, a 15-year loan might be a better choice. However, the lower monthly payments of a 30-year loan could let you use money to pursue other financial goals. Finding Your Loan These are just a few of the options available to finance your home purchase. The mortgage that’s right for one buyer might not be right for another. Be sure to talk to your lender about your life and plans to make sure you get the loan that is best for your situation.

Which Mortgage is Right for You?2021-07-20T01:17:36-05:00

Avoid These Mistakes Between Loan Approval and Closing

2021-05-04T09:15:51-05:00

You’ve been careful with your finances, saved for a downpayment, and finally received approval for a mortgage loan. It’s time to celebrate, right? Not yet. Your lender will recheck your credit right before closing. Don’t give him or her reason to question your creditworthiness by making these mistakes: 1. Changing Jobs Changing employers could mean delays due to employment and salary verifications. Of course, you shouldn’t ignore a great career opportunity. It means only that optional moves should wait. 2. Making a Big Purchase Your debt-to-income ratio is an important factor when being considered for a loan. If you add to your debt by purchasing a car or boat, you risk exceeding the ratio that your lender finds acceptable.  3. Opening Credit Accounts You might apply for a credit card so you’re ready to buy furniture for your new house. But similar to taking on new debt, applying for a new credit account can harm your mortgage approval. The credit inquiry necessary for the new account will ding your credit score a few points, and the lender might wonder just how much you plan on spending with that new account. Part of the mortgage process is a final check to ensure you can afford the loan. Neither you nor the lender wants the payments to be a struggle, so don’t give the lender any reason to doubt your creditworthiness. There are other ways a transaction can fall apart before closing. Be sure to consult with your REALTOR® about contract deadlines and other to-do items to ensure you close on your new property.

Avoid These Mistakes Between Loan Approval and Closing2021-05-04T09:15:51-05:00
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