Pre approved loan
What is Pre-Approval
A written commitment issued by a lender after a comprehensive analysis of the creditworthiness of the applicant, including verification of income, resources, and other such matters as is typically done as part of a normal credit evaluation program.
Conditioned upon the following:
- 1. Identification of a suitable property
- 2. No material change in the applicant’s financial condition or creditworthiness prior to closing
- 3. Limitations not related to the financial condition of creditworthiness of the applicant that a lender ordinarily attaches to a traditional mortgage application, such as completion of a home inspection, acceptable title insurance binder, certification of clear termite inspections, etc.
The issuance of a pre-approval letter implies that a credit decision has been rendered and a mortgage commitment letter is available which also means that the loan has been submitted to underwriting.
Pre-Qualification
The estimation of your borrowing power from a lender and can be accomplished with a simple phone call.
The pre-qualification is based on:
- 1. Income and debt levels that you provide to a lender.
- 2. Possibly (but not always) a credit check.
A pre-qualification is a determination on whether the prospective loan applicant would likely qualify for credit under a lender’s programs and standards, or a determination on the amount of credit the prospective applicant would likely qualify.
The pre-approval is a more complete and formalized process where the borrower actually meets with the lender and supplies him with the last 2 years income tax returns, bank statements, W2’s, etc. The lender asks about employment and runs a credit report.
A pre-approval helps take the guesswork out of buying. There is a firm figure that you, the purchaser and seller can work with in confidence. Securing the commitment from the mortgage company is much closer to reality with a pre-qualification than with a pre-approval – which is of tremendous benefit during deal negotiations.
By speaking with a lender, affordability parameters and appropriate loan programs are identified. Details such as the amount of cash required to close are also determined which is essential information for the purchaser of the property.
Process To Get A Pre – Approved Loan
After having chosen the financial institutions that you want to deal with, schedule an appointment with their advisers in mortgage loans to open a file with them and to compare the rates and terms they offer you. They will ask you to bring any useful financial document, including:
- Pay stubs or T4 forms
- Investments statements
- Credit cards statements
- Statements concerning your past loans
- Information concerning your bank accounts
Your financial institution will “perhaps” ask you to pay minimal expenses for a solvency report and it will communicate with you, 1 or 2 days later. Obtain a pre-approbation before starting to seek a property. It will be thus easier for you to measure yourself with other purchasers likely to buy the house you want.
How long is my loan pre-approbation letter valid for?
Your pre-approbation letter is valid for a period of 30 to 120 days. Although, recognition of preapprobation letters varies from one financial institution to another, an usual rule is to ask a preapprobation for a minimum of 60 days. It’s also important to check the rules currently in effect and pay close attention at the expiration dates.
It is most likely that the financial institution reserves the right to re-examine your situation compared to a certain number of contingencies, in particular a change of interest rate. This organization has also the right to re-evaluate your request in the event of changes in your personal financial position.
Take time to get pre-approved for a loan
Taking time to get pre-approved for a loan and requesting a credit report early in the home shopping process will save you more time and money than you may realize. If you have been pre-qualified but haven’t been pre-approved recently, don’t wait any longer. By being pre-approved you’ll have a better chance to get all of your questions answered before you buy and place yourself in the best position to negotiate a fair market price and get your offer accepted.