Pre-Approved Mortgage

A pre-approval is simply a written commitment by the financial institution. It will outline your down payment and set the maximum you qualify for along with a rate guarantee for 60 or 90 days before the mortgage must be in place. If rates go up during that time, you are protected and will only pay the guaranteed rate, not the new rates. Should they decrease, you will receive the new lower rate. It does not mean you are obligated to deal with that lender if a better deal comes along. They are simply giving you a written offer of what they can and will do. Any pre-approval supplies a secure framework of all the figures but does not mean you necessarily want a mortgage of that size. It is only the maximum you can qualify for. Yes there is fine print. It is always subject to completing an appraisal of the property after you have found a house and have signed the offer to purchase. It sure beats having found a house and then sweating if the mortgage will go through.

Just as pre-approval give you peace of mind, it can also make the seller less concerned, since it avoids a subject to clause in an offer, which only leaves a small number of days to find a suitable mortgage. After all, until all the clauses are removed, there really isn’t a sale. So it creates a better negotiating position because it is clear that mortgage hurdles will not be an issue. The only missing piece is an appraisal of the property since a pre-approval has just approved the purchaser. This last step is coordinated by the lender who will no approve the house for the mortgage as well. Anyone can do most of the pre-approval process. Lenders look at the total debt service ration vs gross income, which cannot exceed 40 percent.