When you're under contract to buy a property, having your mortgage
application denied (after waiting several weeks) may cause you to
lose the property after having spent hundreds of dollars on loan
fees and property inspections.
Even worse, you may lose the home that you've probably spent countless
hours searching for and a great deal of emotional energy to secure.
Some house sellers won't be willing to wait or may need to sell
Prequalification is an informal discussion between borrower and
lender. The lender provides an opinion of the loan amount that
you can borrow based solely on what you, the borrower, tell the
lender. The lender doesn't verify anything and is not bound to
make the loan when you're ready to buy.
is a much more rigorous process, which is why we prefer it if
you have any reason to believe that you'll have difficulty qualifying
for the loan you desire. Loan preapproval is based on documented
and verified information regarding your likelihood of continued
employment, your income, your liabilities, and the cash you have
available to close on a home purchase.
Going through the preapproval process is a sign of your seriousness
to house sellers -- it places a sort of a Good Borrowing Seal of
Approval on you. A lender's preapproval letter is considerably stronger
than a prequalification letter. In a multiple-offer situation where
more than one prospective buyer bids on a home at the same time,
buyers who have been preapproved for a loan have an advantage over
buyers who haven't been proven creditworthy.?
don't charge for prequalification. Given the extra work involved,
some lenders do charge for preapproval. Other lenders, however,
offer free preapprovals to gain borrower loyalty. Don't choose a
lender just because the lender doesn't charge for preapproval. That
lender may not have the best loan terms.?
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