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Confused about mortgage loan approvals?

Posted by kim carpenter on June 1, 2012
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Confused about the difference between a pre-qualification and a pre-approval for a mortgage?

Home purchasers sometimes get into trouble because they are not clued into the sequence of steps involved in financing their purchase. These are qualification, pre-approval, approval and lock.


Qualification (or “pre-qualification” as it is often called) is an opinion that your income, assets and current debts qualify you for a loan of some specified amount.


Pre-approval is a conditional commitment by a lender to make a loan prior to the identification of a specific property. On a pre-approval, unlike a qualification, the lender verifies the information you provide and checks your credit. A pre-approval will stipulate a loan amount or monthly payment, but not necessarily the loan type or the price.

Approval is a commitment by a lender to make a loan. Unlike a pre-approval, a specific property (along with its appraised value) is identified, and the loan details are spelled out. These include the type and purpose of loan, down payment, and type of documentation. It will also include an interest rate, even though a rate is not firmly established until it is locked. The presumption underlying an approval is that the probability of closure is high – much higher than with a pre-approval.


Lock is a commitment by the lender to a specified price – rate and points. Ordinarily, lenders lock at the borrower’s request, and view the borrower as being committed as well.


I recommend that prospective home buyers speak with a lender asap if they are interest in buying a home.

I recommend that they get pre-approved as a way of establishing their bona fides to home sellers.

I recommend that when your offer is accepted, you lock the price the same day or shortly after, because that is when you know the price. Holding off because you expect market interest rates to decline, is a bad gamble in most cases.

Mike Wickham



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