Simplify Home Buying with a Mortgage Pre-Approval

Whether you are ready to go shopping for a home or have already found one - a mortgage pre-approval can save you time and money. And the benefits of having of a locked-in rate.

This page:

  • Explains how a pre-approval makes home shopping easier

  • Describes different types of mortgage pre-approvals

  • Makes clear how an interest rate lock-in can save you cash

This section lays the groundwork for an easy home loan process. Next up we compile a list of the necessary documentation for your mortgage.

In case you missed it, the first part of this mortgage planning guide covers fixing your credit, timing mortgage interest rates and managing your investment.

Get pre-approved and go shopping for a home!

A mortgage pre-approval is a statement from a lender saying that they are willing to lend you a certain amount of money. It's basically the same as an approval for a loan the only difference being that certain things, like loan amount and documentation, have not been finalized.

A mortgage pre-approval is especially important when the housing market is hot. A seller is much more agreeable to contracting with you if she is certain that you are able to pay what you're offering (and not risk missing out on another great offer while your application is being processed.)

Don't confuse pre-approval with a pre-qualification, which is a statement of your qualification for a mortgage. A pre-qualification isn't as valuable because the lender is not committing to approving your mortgage application. They are simply saying that they probably will.

Home loan pre-approvals are generally only good for thirty days, so it's a good idea to get one right before you hit the pavement. Some lenders may also charge a fee for this service and paying a small one is usually worth it for the extra influence it gives you.

Sidebar
Our prime lender Eloan, does not charge for pre-approval, or for anything else. You can get pre-approved there in minutes.
If your credit is not so good, pre-approval takes longer, but you can get pre-qualified at FullSpectrum today.

Savvy sellers (and borrowers) also know to differentiate between firm commitment and limited commitment pre-approvals:

• Firm commitment statements approve the mortgage amount provided nothing in the borrower's situation changes (like employment status). A lender must affirm all your credit information already in order to issue this type of pre-approval.

• A limited statement approves the mortgage amount only if all your information checks out. This type of statement is much weaker and not nearly so valuable in securing a home in a hot market.

Lock-in a low interest rate.

An interest rate lock-in is simply a commitment between you and the lender to a currently quoted interest rate, even if that rate changes during the time between your mortgage application and final approval.

Lock-ins are very beneficial to you if it looks like rates will be rising in the near future. But, if rates drop, you're committed to the higher previous rate though lenders can be flexible about renegotiating. (Borrowers often simply switch lenders if this happens, which makes lock-ins much more beneficial to the borrower than to lender.)

You may have to pay a deposit on a lock-in as well, which is probably worth paying if interest rates are low.

Note: neither Eloan nor Fullspectrum charges for a rate lock.

Lenders usually offer a variety of lock-in time periods, from 15 to 60 days, 60-day being the most expensive.

But, given the speed with which internet loans are processed, if you're getting your mortgage online you probably won't need a lock-in for longer than 15 days

Of course, before you get pre-approved and head out the door house-hunting, you need to get the right paperwork together.

Next: Necessary documentation: what you'll need for pre-approval

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