A Mortgage Pre-Qualification is a casual process that’s really more of an information gathering and is an only an estimate/close approximations to what you’ll qualify for if you submit a formal application that undergoes a more in-depth review. The Pre-Qualification helps to understand your budget before you even begin house hunting.
What is a Pre-Qualification best for?
A Pre-Qualification can be beneficial if you are planning on buying a house in the future and want to look at how lenders view your financial history. A Pre-qualification does not require too much documentation up front.
If you are in the serious stages of buying a home then a Pre-Approval is the way to go.
Note: To be approved for a loan, the information stated in a Pre-Qualification must be fully verified and underwritten.
The Mortgage Pre-Approval process is a more in-depth review of your financial background. You'll complete an official mortgage application which includes a credit report and you will supply necessary documents. From this, you will receive a letter with the mortgage amount for which you have been Pre-Approved. You can shop with confidence with a specific purchase price and loan amount for which you are likely to be approved. The Pre-Approval is usually valid for a particular time period, such as 90 days.
A Pre-Approval can give you a competitive edge when purchasing a home and let's home sellers know that you are ready to make the purchase.
Some reasons for Home Mortgage
Reduce your monthly mortgage payment : A refinance may help you lower payment and possibly save you money.
Pay Off Your Mortgage Faster: The shorter the term on your mortgage, the lower your mortgage rate. Did you know that you may be able to take advantage of today’s competitive rates by shortening the term of your loan (which means paying less interest) without a significant change in your monthly payment.
Mortgage brokers — A broker is a ‘middleman.
Brokers have less control over the underwriting process because they don’t work for the lender. If the wholesale underwriter puts your file on the back-burner, your broker may not be able to do anything about it
Brokers tend to be more expensive. But that may be because they get more complex loans, and HUD says that complexity does drive up lender costs
Brokered loans can take longer to close. This could be a concern if you have a tight deadline for home buying or refinancing
Direct lenders (‘mortgage lenders) — Originate, process, and fund the loans themselves. In other words, the company you work with is the one lending the money. Direct lenders specialize in home loans such as our company. Direct lenders use their own money to fund mortgages. And their loan officers, processors, and underwriters all work for the same company.
That means you can go right to the source if you want a loan from a direct lender. Direct lenders have more control over your file, are generally faster and offer great mortgage rates.
Full Documentation Loan refers to a loan where all income and assets are documented. It is typically referred to as a "full doc" loan in the mortgage industry and is a common type of loan used for financing a home purchase. A list of the various types of loans can be found at Mortgage Loan Documentation.