Pre-Approval
Definition of "Pre-Approval"
A lender commitment to make a mortgage loan to a specified borrower, prior to the identification of the property that will be mortgaged. On a pre-approval, unlike a pre-qualification, the lender verifies the financial information provided and checks the credit of the potential borrower. Prospective homebuyers seek pre-approvals because they believe it helps them in shopping for a house. Lenders offer pre-approvals in the hope that the homebuyers receiving them will come back to them for a loan after they contract to purchase. The lender's commitment under a pre-approval is usually expressed in terms of the monthly mortgage payment that the prospective buyer has the income to meet. Converting the mortgage payment into a loan amount requires an assumption regarding the interest rate, which is not known at the time of the pre-approval. Since the lender is not committed to an interest rate, an increase in rates could reduce the approved loan amount.
Popular Mortgage Terms
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The definition of an assumable mortgage is what happens when a buyer assumes or takes over a mortgage that the seller contracted. This is a type of financial arrangement that passes an ...
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The amount the borrower promises to repay, as set forth in the loan contract. The loan amount may exceed the original amount requested by the borrower if he or she elects to include ...
Points paid by a lender for a loan with a rate above the rate on a zero point loan. For example, a lender might quote the following prices: 8%/0 points, 7.5%/3 points, 8.75%/-2.5 points. ...
The lender's risk that, between the time a lock commitment is given to the borrower and the time the loan is closed, interest rates will rise and the lender will take a loss on selling ...
Same as term Interest Rate: The rate charged the borrower each period for the loan of money, by custom quoted on an annual basis. A mortgage interest rate is a rate on a loan secured by a ...
The portion of the monthly payment that is used to reduce the loan balance. ...
Belief that there is a special way to pay down the balance of a home mortgage faster, if you know the secret. ...
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