Pre-Approval


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Preapproval

A commitment by a mortgage lender to provide a loan with a certain monthly payment to a borrower. A lender offers pre-approvals in hopes that the borrower to whom it is offered will use that lender in securing a mortgage. It should be noted that, while the monthly payment is fixed, the interest rate and therefore the total amount available to be borrowed are not. This can limit the potential borrower's options as he/she seeks to buy real estate.

Pre-Approval

A lender commitment to make a mortgage loan to a specified borrower, prior to the identification of the property that will be mortgaged.

On a pre-approval, unlike a pre-qualification, the lender verifies the financial information provided and checks the credit of the potential borrower.

Prospective homebuyers seek pre-approvals because they believe it helps them in shopping for a house. Lenders offer pre-approvals in the hope that the homebuyers receiving them will come back to them for a loan after they contract to purchase.

The lender's commitment under a pre-approval is usually expressed in terms of the monthly mortgage payment that the prospective buyer has the income to meet. Converting the mortgage payment into a loan amount requires an assumption regarding the interest rate, which is not known at the time of the pre-approval. Since the lender is not committed to an interest rate, an increase in rates could reduce the approved loan amount.

References in periodicals archive ?
It also offers an online pre-approval form to help move the process along.
Mohammed bin Rashid Housing Establishment says residents of housing complexes developed by the entity who want to make modifications to their property, will no longer require pre-approval.
But instead of giving the member just one pre-approval letter for that amount, the credit union might give four letters: one for $300,000, one for $315,000, one for $330,000 and the last for $350,000.
The deadline for the pre-approval controlled functions return has been changed from April 30 to June 30.
Banks start to inform customers that their pre-approval letters stand cancelled as the UAE Central Bank caps expat mortgages at 50 per cent of a property's value
But before you run to a lender to get a pre-approval, it is important to keep some important points in mind.
According to the Vancouver Sun: "We have new media interview procedures that require pre-approval of certain types of interview requests by the minister's office," wrote Judy Samoil, NRC's western regional communications manager, in a March 24 e-mail to colleagues.
At the same time, BMI announced its new pre-approval process, committing to provide an answer on mortgage loan commitments and conditions within a maximum of 24 hours to customers who provide their CPR and evidence of income.
The professionally produced lobby brochures, posters, and buttons on first-time homebuying and the pre-approval process were created to promote mortgage origination.
Sudhoff] was adamant about me not getting in over my head and yelled at me when she learned that my realtor was showing me stuff that priced over the limit she set in her pre-approval letter," says Stone.
Second, the proposed rules would further implement the SOA's pre-approval requirement by strengthening the auditor's responsibilities to seek audit committee pre-approval of tax services.