There are various terms associated with a mortgage in Winnipeg, and many of them do sound quite similar. They have different meanings though and being prepared for them is important. This can help you to decide what you are going to pursue and to know where you stand in that mortgage process. Here, you will learn about three very important terms:
- Pre-Approved
- Pre-Qualified
- Approved
Pre-Qualified
Getting pre-qualified for a mortgage involves the lender taking a look at your credit report. This helps them to get an idea of what type of score you have and your overall debt. Some lenders will even offer a pre-qualification approval certificate that you can share with the realtor. This shows them that you are serious about getting into a home of your own. It also shows that you have done some of the first steps to finding out if you qualify.
Pre-Approved
With the pre-approved part of the process, it is far more in depth than just looking at your credit report. The potential lender is going to look at your overall scenario. Not only will they determine if you can qualify for a home loan, they will also determine how much you can qualify for. This is a huge benefit when you go to look for a home. It allows you to know the price range for the home you can buy.
Such information is very useful to the buyer and to the real estate agent that they are working with. It helps with narrowing down the prospects. The goal of the real estate agent is to help a potential buyer to find what meets their needs and what they can afford. With the dollar amount known, they can avoid moving them in the direction of a home that they can’t afford.
For a buyer, it helps them to decide if they would like to proceed at that point in time. If the dollar amount they are approved for is enough to get the type of home they want in the location they want, they will typically move forward with it. If the dollar amount isn’t enough, they can decide to buy a home for now, knowing that they will sell it in a few years and move into something else. The other option is to wait on buying for now and to pay off debts so that they can get pre-approved for more money in the future.
The pre-approval should include a good faith estimate of all closing costs on the loan. The lender should be able to provide the consumer with a letter that states how much they have been pre-approved for. There is typically going to be an expiration date on that letter. If they don’t find a home that they wish to make an offer on in that period of time, then they will need to go through the pre-approval process again.
Approved
When an offer has been made on a home, it is a good feeling to have that pre-approval already in place. The contract for buying the home should include a stipulation that the contract is only binding if the consumer is approved for the loan. Consumers should avoid any major purchases between the pre-approval and the approved period. Such a purchase could result in changes to the amount they qualify for.
The approval process is where the final paperwork is completed regarding that home loan. It has all of the figures including the dollar amount to be financed and any other calculations. For example, if the insurance and property taxes will also be added into the loan. The interest rate and the monthly payment will be part of that loan approval documentation. In order to be legally binding, all involved parties on that loan must sign those documents.