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
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 ...
A second mortgage on a property that is not paid off when the first mortgage is refinanced. The second mortgage lender must allow subordination of the second to the new first mortgage. ...
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 ...
Adjustable rate mortgages on which the interest rate is mechanically determined based on the value of an interest rate index. Indexed ARMs are distinguished from Discretionary ARMs, in that ...
A mortgage on which half the monthly payment is paid twice a month. It should be called a 'semi-monthly mortgage' but market practice often trumps logic. In contrast to a biweekly, a ...
A Web site of an individual lender offering loans to consumers. Most Internet shoppers want a list of lenders in whom they can have confidence, who will provide them with the information ...
The sum of all interest payments to date or over the life of the loan. This is an incomplete measure of the cost of credit to the borrower because it does not include upfront cash ...
A lender that provides loans through mortgage brokers or correspondents. ...
The option to convert an ARM to an FRM at some point during its life. ...
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