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
The total cash required of the home buyer/borrower to close the purchase plus loan transaction or the loan transaction on a refinance. Required cash includes the down payment, points and ...
A documentation rule where the borrower discloses income and its source but the lender does not verify the amount. ...
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 specific property. ...
The standards imposed by lenders in determining whether a borrower can be approved for a loan. These standards are more comprehensive than qualification requirements in that they include ...
The frequency of rate adjustments on an ARM after the initial rate period is over. The rate adjustment period is sometimes but not always the same as the initial rate period. As an example, ...
Mortgages typically amortize over time through fixed value installment payments. However, there's a type of mortgage that doesn't: the Balloon Mortgage. It's called this way because, with ...
The dollar amount of interest paid each month. The interest payment is the same as interest due so long as the scheduled mortgage payment is equal to or greater than the interest due. ...
Compiling and maintaining the file of information about the transaction, including the credit report, appraisal, verification of employment and assets, and so on. Mortgage brokers usually ...
Advice on where to go to get a mortgage. A borrower can always select a loan provider by throwing a dart at the Yellow Pages. A referral is of value if it raises the probability of a ...
Have a question or comment?
We're here to help.