How to Estimate Mortgage Pre-Approval Amount, mortgage preapproval.#Mortgage #preapproval


How to Estimate Mortgage Pre-Approval Amount

In a preapproval, a lender examines your financial information, including evidence of your income and your credit report, to determine how much it will be willing to lend. To estimate how much you re likely to qualify for, you ll need to calculate your income and account for every debt you re responsible for, not just those associated with housing. Unlike a prequalification, which relies on the data you provide, preapproval is a strong indicator of the maximum size of your mortgage. Preapproval letters generally are valid for 60 to 90 days.

Determining Factors

Key factors in determining how much you ll be able to borrow include:

  • Your debt to income ratio, or DTI
  • Your down payment
  • Your credit history
  • The value of the property

Your debt-to-income ratio is the single biggest factor in determining whether your preapproval request will be approved and for how much, according to a Fair Isaac Corporation study of credit risk managers in the United States and Canada. Two DTI ratios are considered — the front-end ratio and the back-end ratio.

Front-end DTI Ratio

The front-end ratio measures what percentage of your income will go towards your housing costs. The lender takes your pre-tax gross income from all sources. It then calculates how much your monthly housing expenses are projected to be, including your mortgage principal and interest, property taxes and insurance. The target number here is 28 percent — lenders like to see your housing expenses at or below 28 percent of gross monthly income, though they may go higher if the rest of the application is strong.

Back-end DTI Ratio

Your back-end ratio takes your gross income and measures it against all recurring debts — not just your mortgage, but also any car payments, student loans, credit card debt payments and personal loans. The maximum lenders generally accept here is 43 percent, and you re more likely to see lenders balk at someone close to that number than you are to find a lender that will exceed it. You may get more wiggle room here if some of the loans are within a few months of being paid off.

PITI Ratio

You ll also need to calculate your PITI. This examines your principal, interest, property taxes and insurance as a percentage of your income. The standard here is 29 percent — you ll have trouble being approved for a loan if yours is higher, particularly if it is over 32 percent.

Down Payment and LTV Ratio

If your ratios aren t quite up to standards, you may be able to win preapproval for a mortgage anyway if you re prepared to make a sizable down payment. The more you put down, the more skin you have in the game and the more you have to lose if you default. This is particularly true if you can afford to pay 20 percent or more of the price of the home. The down payment amount is expressed in the loan-to-value ratio,and the higher the LTV, the bigger the risk you are. If you re prepared to pay $20,000 down on a $100,000 home, your LTV is 80 percent — a very respectable number. That same amount on a $400,000 home would leave an LTV of 95 percent, and place you in a higher risk pool that would decrease your chance of winning preapproval.

Sample Calculation

Say you make $5,000 per month and have $750 in monthly expenses not related to housing. Your maximum monthly housing expenses for most lenders would be $1,400 — or 28 percent according to your front-end DTI ratio. However, your back-end DTI ratio would include your other debts. At the 43 percent figure, that would be $5,000(0.43)-750 — which in this case gives you the same $1,400 figure. Your PITI at 29 percent would be $1,450 ($5,000 x 0.29).

As a result, you could likely be preapproved for a mortgage that would require an estimated $1,400 per month once taxes and insurance were factored in, assuming your credit score and LTV ratio satisfied the lender.


Pre-Qualification vs, mortgage preapproval.#Mortgage #preapproval


Pre-Qualification vs. Pre-Approval

Mortgage preapproval

Mortgage Q A: Pre-Qualification vs. Pre-Approval

When you initially set out to purchase a new home, the real estate agent(s) and home seller will want to know you can actually afford the thing. Heck, you ll want to know too.

After all, if you can t afford to buy it, you ll be wasting everyone s time. Aside from affordability concerns, you may find other issues that disqualify you from obtaining a mortgage (do I qualify for a mortgage?).

Agents and home sellers will also want to know that you re committed to buying a home, as opposed to those just casually browsing.

For these reasons, most real estate agents will demand that you get pre-approved before they even begin showing you prospective properties. Most agents have a mortgage contact they ll likely refer to you to get the ball rolling.

Tip: You can use this contact for your pre-qualification and pre-approval needs, but don t forget to shop around with other banks and brokers as well to ensure you obtain the lowest mortgage rate possible!

What Is a Pre-Qualification?

If you choose to finance the home purchase with a mortgage, you ll need to get pre-qualified first. A “pre-qualification” isn t as robust as a pre-approval, but it s a good first step to ensure you can purchase the home you desire (or any one at all).

A pre-qualification is a pretty straightforward, simple check to see what you can afford based on your income/debt levels (debt-to-income ratio), assets, down payment, employment history, perceived credit score, and so on.

You can get pre-qualified very quickly and easily with a bank or mortgage broker, but it won t carry much weight in the eyes of the agent or the seller.

After all, with a pre-qualification you re simply supplying estimates and your credit report probably hasn t yet been run (though it should be pulled early on in the process). That said, a pre-qualification, or pre-qual, is just a determination of what you d likely qualify for if you made an offer and applied for a home loan.

It s not necessarily a waste of time, but it s not going to get you very far. You can liken it to running a few numbers to see where you stand, but it cannot be used in place of a pre-approval.

What Is a Pre-Approval?

A pre-approval, on the other hand, actually has legs. It s a written, conditional commitment from a bank or mortgage lender that says you are pre-approved for the mortgage financing in question.

It comes only after filling out a loan application, supplying verified income, asset, and employment documentation (assuming these items are necessary), running credit, and underwriting the loan file.

Acquiring a pre-approval shows the interested parties (sellers, agents) that you re a committed buyer, boosting your chances of sealing the deal at the price you want. It will also show you how much house you can afford, not just an estimate.

How Long Is a Mortgage Pre-Approval Good For?

Once you provide all the required documentation and get the mortgage pre-approval letter from a bank or lender, it is typically valid for 60-90 days. Just note that a lot of things can change during that time, such as your credit score, so it s not 100% guaranteed.

Again, a pre-approval is not a guarantee that you will be approved for a mortgage. Otherwise it would just be an approval. And even an approval is still conditional on you meeting a series of requirements set forth by the lender.

If things do change dramatically, or even a little bit, it won t matter if the pre-approval is just a few days old, as material changes can affect the outcome of your approval.

For example, if your credit score falls below a key threshold, like from 620 to 618, you could be denied after getting your pre-approval letter. It s not the bank s fault either, it s just an unfortunate turn of events.

Same goes for anything the underwriter sniffs out during the approval process. They get a lot more involved and may find things that were initially missed.

When it comes down to it, an approval is never a sure thing until the mortgage is funded and closed!

As you can see, being pre-approved and pre-qualified are not the same thing, so make sure you know the difference before shopping for a home.

Do You Need a Pre-Approval Letter to Make an Offer?

At the end of the day, you don t necessarily NEED a pre-approval letter to make an offer on a piece of property. But nowadays, with so few properties on the market, and so many multiple-bid situations, it s often a requirement just to hear back from the seller s agent.

Sure, you can tell your real estate agent to tell the listing agent that you ve got an 800 credit score, $1 million in the bank, and a job that pays you $500,00 a year. And they might say fine, skip the pre-approval.

But chances are that s not your financial profile, so just to play ball and keep everyone happy, it often makes sense to get the pre-approval done. It will also strengthen your offer.

And as I alluded to earlier in this post, it s good to know where you stand as well. You might think you re a sure shot at getting a mortgage, but surprises aren t all that uncommon and mortgage guidelines change all the time.

So a pre-approval could actually save you time and money, despite being a task that needs to be taken care of upfront. It shouldn t take very much work to get one anyway.

There are brokers and lenders that can get you one the same day, or even within a few hours, thanks to new technologies that are able to automatically verify things like your credit scores, employment, income, and assets.

Just remember not to feel obligated to use the bank that furnishes the pre-approval letter for you! It s entirely possible to go elsewhere, and even use the letter to get a better offer from a different lender.

Next Step After Pre-Approval

The next step after receiving a mortgage pre-approval is to either apply with the lender who provided it or apply for the loan elsewhere. You can certainly shop around and decide which company is the best fit.

Once you ve selected a lender, you ll need to sign disclosures and express your intent to proceed with the loan application. The lender will then begin collecting paperwork and signatures, including the purchase contract, in order to process the loan.

It will eventually land on an underwriter s desk for full approval, at which point a list of conditions will be generated (if applicable) in order to fund the loan.

You will also be given an opportunity to lock your loan early on so the interest rate you are quoted won t change.

To summarize, the difference between a pre-qualification letter and a pre-approval letter (for you lazy readers):

  • First step
  • Less robust
  • Based on estimates
  • Doesn t require a credit pull
  • Carries less weight/ not a sure thing
  • Not taken seriously
  • Based on verified information
  • Must complete an actual loan application
  • Requires a credit pull
  • Must be underwritten (manual or automated)
  • Written conditional commitment
  • Shows sellers/real estate agents you re serious

Get Pre-Approved for a Mortgage, Quicken Loans, mortgage preapproval.#Mortgage #preapproval


Get Preapproved for a Mortgage

Know Your Price Range

Don’t waste time shopping outside your budget. A preapproval tells you exactly what you can afford.

Make a Winning Offer

A preapproval shows sellers that you’re a serious buyer who won’t run into financing problems.

Get to Closing Faster

Get a head start on your application so you can put more of your focus on moving in to your new home.

Like What You See? Let’s Get Started.

How to Get Preapproved for a Mortgage

You can get preapproved online in minutes with Rocket Mortgage®, or you can get preapproved by calling a Home Loan Expert at (800) 251-9080. Here’s an overview of what you’ll need to provide no matter which way you choose:

  • Your personal information: We’ll ask for your name, contact information and information about anyone who will be listed on the loan with you, like your spouse.
  • Your desired location: Have a house in mind already? We’ll ask for the address. Not sure which house you want to buy? That’s OK too – just let us know what cities you’re looking in.
  • Your income information: We’ll need to know details about your income and employment situation.
  • Your assets and debts: In order to give you accurate numbers, we’ll ask about your assets (like savings accounts or property) and any debt you’re carrying (like credit cards, car loans, student loans or other mortgages). We’ll also check your credit at this time so we can give you an accurate interest rate.

If you have additional questions, you can chat with a Home Loan Expert or call (800) 251-9080.

Common Questions About Preapprovals

What’s the difference between a preapproval and a prequalification?

A preapproval takes a more thorough look at your finances than a prequalification does. Because a preapproval involves a review of your credit history, income, assets and debt, it is a surer estimate of how much you can get approved for.

What is a preapproval letter or PAL?

A preapproval letter (PAL) states how much you can get approved for and what your interest rate will be. Once you’re preapproved, we’ll create a preapproval letter that you can download and print.

Does a preapproval letter guarantee what I can get approved for?

A preapproval letter is a first look at what you can expect to be approved for. Once you’ve found a home and your offer has been accepted, we’ll complete a formal underwriting review, or a more thorough review of your home loan application and finances.

How long does it take to get preapproved for a mortgage?

With Rocket Mortgage®, you can get preapproved for a mortgage in minutes. If you want to talk to a Home Loan Expert instead, you can usually get preapproved in just a phone call.

Does getting preapproved commit me to anything?

No. Getting preapproved does not mean you are obligated to get a mortgage with us or anyone else. We offer preapprovals as a service to help you know what you can afford.

Do preapprovals expire?

Preapprovals expire after 90 days. If you haven’t made an offer within 90 days of getting a preapproval letter, you can call your Home Loan Expert to renew it.

Will getting preapproved affect my credit score?

We’ll have to check your credit to preapprove you, and this can lower your score by a few points. However, if multiple lenders check your credit over a short period of time, the credit bureaus will count these inquiries as a single credit pull, and your score will only be lowered once.

It’s a good idea to stay on top of your credit history. You can track all your debts in one place and get your free credit report and score from QLCredit.

Should I get preapproved before working with a real estate agent?

We recommend getting preapproved first. Once you’re preapproved, it will be easier for your real estate agent to know what you can afford. If you need help finding a real estate agent, our sister company In-House Realty can connect you with an expert in your area.

Quicken Loans Is Obsessed with Finding a Better Way

We’ll help you understand the details so you get the right solution based on your goals. See how we make things simple for our clients.


Loan Officer CRM, Lead Management – Mortgage Workflow Software, mortgage preapproval.#Mortgage #preapproval


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Mortgage preapprovalReal Estate Agents

Nestablish allows real estate agents to generate their own loan officer-signed pre-qualification letters, any time they want, from anywhere. And it’s free.


Pre-Qualification vs, mortgage preapproval.#Mortgage #preapproval


Pre-Qualification vs. Pre-Approval

Mortgage preapproval

Mortgage Q A: Pre-Qualification vs. Pre-Approval

When you initially set out to purchase a new home, the real estate agent(s) and home seller will want to know you can actually afford the thing. Heck, you ll want to know too.

After all, if you can t afford to buy it, you ll be wasting everyone s time. Aside from affordability concerns, you may find other issues that disqualify you from obtaining a mortgage (do I qualify for a mortgage?).

Agents and home sellers will also want to know that you re committed to buying a home, as opposed to those just casually browsing.

For these reasons, most real estate agents will demand that you get pre-approved before they even begin showing you prospective properties. Most agents have a mortgage contact they ll likely refer to you to get the ball rolling.

Tip: You can use this contact for your pre-qualification and pre-approval needs, but don t forget to shop around with other banks and brokers as well to ensure you obtain the lowest mortgage rate possible!

What Is a Pre-Qualification?

If you choose to finance the home purchase with a mortgage, you ll need to get pre-qualified first. A “pre-qualification” isn t as robust as a pre-approval, but it s a good first step to ensure you can purchase the home you desire (or any one at all).

A pre-qualification is a pretty straightforward, simple check to see what you can afford based on your income/debt levels (debt-to-income ratio), assets, down payment, employment history, perceived credit score, and so on.

You can get pre-qualified very quickly and easily with a bank or mortgage broker, but it won t carry much weight in the eyes of the agent or the seller.

After all, with a pre-qualification you re simply supplying estimates and your credit report probably hasn t yet been run (though it should be pulled early on in the process). That said, a pre-qualification, or pre-qual, is just a determination of what you d likely qualify for if you made an offer and applied for a home loan.

It s not necessarily a waste of time, but it s not going to get you very far. You can liken it to running a few numbers to see where you stand, but it cannot be used in place of a pre-approval.

What Is a Pre-Approval?

A pre-approval, on the other hand, actually has legs. It s a written, conditional commitment from a bank or mortgage lender that says you are pre-approved for the mortgage financing in question.

It comes only after filling out a loan application, supplying verified income, asset, and employment documentation (assuming these items are necessary), running credit, and underwriting the loan file.

Acquiring a pre-approval shows the interested parties (sellers, agents) that you re a committed buyer, boosting your chances of sealing the deal at the price you want. It will also show you how much house you can afford, not just an estimate.

How Long Is a Mortgage Pre-Approval Good For?

Once you provide all the required documentation and get the mortgage pre-approval letter from a bank or lender, it is typically valid for 60-90 days. Just note that a lot of things can change during that time, such as your credit score, so it s not 100% guaranteed.

Again, a pre-approval is not a guarantee that you will be approved for a mortgage. Otherwise it would just be an approval. And even an approval is still conditional on you meeting a series of requirements set forth by the lender.

If things do change dramatically, or even a little bit, it won t matter if the pre-approval is just a few days old, as material changes can affect the outcome of your approval.

For example, if your credit score falls below a key threshold, like from 620 to 618, you could be denied after getting your pre-approval letter. It s not the bank s fault either, it s just an unfortunate turn of events.

Same goes for anything the underwriter sniffs out during the approval process. They get a lot more involved and may find things that were initially missed.

When it comes down to it, an approval is never a sure thing until the mortgage is funded and closed!

As you can see, being pre-approved and pre-qualified are not the same thing, so make sure you know the difference before shopping for a home.

Do You Need a Pre-Approval Letter to Make an Offer?

At the end of the day, you don t necessarily NEED a pre-approval letter to make an offer on a piece of property. But nowadays, with so few properties on the market, and so many multiple-bid situations, it s often a requirement just to hear back from the seller s agent.

Sure, you can tell your real estate agent to tell the listing agent that you ve got an 800 credit score, $1 million in the bank, and a job that pays you $500,00 a year. And they might say fine, skip the pre-approval.

But chances are that s not your financial profile, so just to play ball and keep everyone happy, it often makes sense to get the pre-approval done. It will also strengthen your offer.

And as I alluded to earlier in this post, it s good to know where you stand as well. You might think you re a sure shot at getting a mortgage, but surprises aren t all that uncommon and mortgage guidelines change all the time.

So a pre-approval could actually save you time and money, despite being a task that needs to be taken care of upfront. It shouldn t take very much work to get one anyway.

There are brokers and lenders that can get you one the same day, or even within a few hours, thanks to new technologies that are able to automatically verify things like your credit scores, employment, income, and assets.

Just remember not to feel obligated to use the bank that furnishes the pre-approval letter for you! It s entirely possible to go elsewhere, and even use the letter to get a better offer from a different lender.

Next Step After Pre-Approval

The next step after receiving a mortgage pre-approval is to either apply with the lender who provided it or apply for the loan elsewhere. You can certainly shop around and decide which company is the best fit.

Once you ve selected a lender, you ll need to sign disclosures and express your intent to proceed with the loan application. The lender will then begin collecting paperwork and signatures, including the purchase contract, in order to process the loan.

It will eventually land on an underwriter s desk for full approval, at which point a list of conditions will be generated (if applicable) in order to fund the loan.

You will also be given an opportunity to lock your loan early on so the interest rate you are quoted won t change.

To summarize, the difference between a pre-qualification letter and a pre-approval letter (for you lazy readers):

  • First step
  • Less robust
  • Based on estimates
  • Doesn t require a credit pull
  • Carries less weight/ not a sure thing
  • Not taken seriously
  • Based on verified information
  • Must complete an actual loan application
  • Requires a credit pull
  • Must be underwritten (manual or automated)
  • Written conditional commitment
  • Shows sellers/real estate agents you re serious

Mortgage Preapproval: How It Helps A Homebuyer, mortgage preapproval.#Mortgage #preapproval


3 essential reasons to get a mortgage preapproval

Shopping for a home before getting preapproved for a mortgage is the equivalent of walking into a grocery store without a wallet. Yet, the vast majority of homebuyers don’t get a loan preapproval for the house hunt. So, what is a preapproval? For one, a preapproval is different from a prequalification.

Prequalification: The lender relies on information provided by the buyer to estimate how much the borrower could qualify for.

Preapproval: The lender verifies the borrower’s information and documentation to determine exactly how much it would be willing to lend to that borrower.

“The documents to get preapproved are the same documents that you would need to get a mortgage,” says Jordan Roth, mortgage specialist with Guardhill Financial Corp. in Glen Rock, New Jersey.

  • Pay stubs.
  • Last two years’ W-2s.
  • Last two federal tax returns.
  • Two months’ worth of bank statements of all types of accounts.
  • Your credit report.

Make sure there are no mistakes on your credit report. Get your report for free at myBankrate.

A preapproval is not a loan commitment, but it helps speed up the underwriting and loan approval process, Roth says.

Here are three reasons it’s better to get a mortgage preapproval before you go house hunting.

No. 1: The competitive market

Buyers often are eager to start looking at homes and tend to leave what they view as the boring, bureaucratic part of the homebuying process for last, says Michael Highfield, associate professor of finance and head of Mississippi State University’s department of finance and economics.

“But in this competitive market, any serious buyer should pursue a preapproval from a lender in advance to beginning a home search,” he adds.

No. 2: No preapproval, no accepted offer

Real estate and loan professionals say it’s common to come across buyers who skip the preapproval process.

In fact, less than 10 percent of buyers who got a mortgage in 2016 got preapproved by the lender who originated the loan, according to a Bankrate analysis of data from ComplianceTech’s LendingPatterns.com.

“It happens every day,” says Patty Da Silva, a real estate agent and owner of Green Realty Properties in Davie, Florida. “I can’t believe I still get offers today without a preapproval.”

As with many other agents and sellers, Da Silva says she rejects offers from buyers who don’t have preapproval letters from their banks.

“You have to have a preapproval and it must be a real preapproval where the lender has verified not just your credit, but bank statements, tax returns — and I call the lender to verify that,” she says.

No. 3: You need to know where you stand

Some buyers put off the loan application because they fear a lender may not approve them for the amount they plan to spend to buy the house, Highfield says.

“It’s like when people don’t go to the doctor for their annual checkup when they are afraid to find out what’s wrong with them,” he adds. “That’s the same thing with getting preapproved.”

Others simply don’t want to share an abundance of private information with a lender until they actually find the home they want, he says.

You are beyond compare

Even if you pay your bills on time and earn about the same as the friend who just got that $300,000 mortgage, don’t assume you qualify for the same loan.

“A credit score difference of 700 to 680 can severely affect one’s ability in terms of down payment,” Roth says.

Getting preapproved before you shop for a loan also allows buyers time to fix unexpected errors on their credit reports, Da Silva says.


The Mortgage Porter –, mortgage preapproval.#Mortgage #preapproval


The Mortgage Porter

Every Thursday morning, Freddie Mac publishes the Prime Mortgage Market Survey, a weekly report based on conventional rates from the previous week. It s an average and it s also old news as a borrower cannot lock in last week s rates they can only lock in what s available now . Last week s survey shows that rates are remaining at historically low levels.

Mortgage preapproval

With that said, I don t anticipate that rates will remain at these low levels forever. It will be interesting to see how having a new Fed Chair, assuming President Trump retires Janet Yellen as he s indicating, will impact the direction of mortgage interest rates.

What we do know is rates are low now and that many home owners are appreciating increased equity so if you ve been considering refinancing, you may want to get the ball rolling.

I m happy to help you with your purchase or refi of homes located anywhere in Washington state, where I m licensed. Click here for a no-hassle mortgage rate quote.

Beware of Bogus Badness in your Email

There has been rampant wire fraud taking place in the real estate industry. This morning, I received an email appearing to contain a purchase and sales agreement for a new transaction with a link to download the contract.

Mortgage preapproval

Mortgage rates at 2017 lows!

Freddie Mac s weekly survey of mortgage rates reveals that last week interest rates remained at 2017 lows.

Mortgage preapproval

Attributed to Sean Becketti, chief economist, Freddie Mac.

Following a sharp decline last week, the 10-year Treasury yield rose 11 basis points this week. The 30-year mortgage rate, however, remained unchanged at 3.78 percent. If Treasury yields continue to rise, mortgage rates could see an increase in next week s survey.

Remember, this is last week s information. You cannot lock in a mortgage rate from last week unless you are a time traveler. If you would like current mortgage rates based on your personal scenario for your home located anywhere in Washington state, please contact me!

Can you get a Mortgage with Frozen Credit?

Mortgage preapprovalIn light of Equifax s recent massive credit breach, many people are going through the process of freezing their credit with each of the credit bureaus. This prevents someone from obtaining a new credit account in your name (it does not prevent them from using existing credit). I actually decided to freeze my credit a while back when it appeared that someone was trying to commit fraud with our address. It s not that difficult to do and it s pretty easy to forget about until you decide to apply for new credit, such as getting a mortgage. [Read more ]

Were you potentially hacked from the massive Equifax breach?

Mortgage preapproval

Equifax announced yesterday that they ve were hacked on a scale unlike any we ve seen potentially impacting half of our population.

From Equifax: a cybersecurity incident potentially impacting approximately 143 million U.S. consumers. Criminals exploited a U.S. website application vulnerability to gain access to certain files. Based on the company’s investigation, the unauthorized access occurred from mid-May through July 2017. [Read more ]

Mortgage Rates hit 2017 lows!

Freddie Mac released their weekly Prime Mortgage Market Survey today announcing that mortgage rates hit 2017 lows. Mortgage preapproval

The PMMS is based on average rates for conforming mortgages from last week. The rates do not include closing cost and are priced with 0.5 point.

Attributed to Sean Becketti, chief economist, Freddie Mac.

The 10-year Treasury yield fell 6 basis points this week amid concerns over lagging inflation. The 30-year mortgage rate also declined for the fourth consecutive week, dropping 3 basis points to a new year-to-date low of 3.86 percent.

If you re considering refinancing, you may be in luck! If you would like me to provide you with a current mortgage rate quote for your personal scenario for your property located anywhere in Washington state, please click here.

New Updated Guide Book for First Time Home Buyers

Hot off the press (or keyboard?)! The eBook that I wrote for first time home-buyers has been completely updated. Please feel free to share this with anyone you know who is considering buying a home anywhere in Washington state. You can access the eBook below or by clicking this link: Your First Home Mortgage Guide Book by Rhonda Porter

Of course, if you re considering buying your first, second home, vacation or rental homes in Washington state, I am happy to help you! Click here for a no hassle rate quote or here to start the preapproval process.

My Seattle Kitchen Remodel: Selecting Countertops

A few weeks ago, I shared that we re remodeling our kitchen. Boy-oh-boy what a chore it is we started the process months ago and are just starting to see light at the end of the tunnel. As I m going through this first hand, I thought I d share tidbits of things we re learning along the way. Today, I ll share the story of our kitchen counters.

Mortgage preapproval

Let s start by discussing what we had on our old kitchen (photo above). [Read more ]

About the Author

Rhonda Porter is a Licensed Mortgage Originator MLO121324 living in the greater Seattle area. Rhonda began her career in 1986 in the title and escrow industry and joined Mortgage Master Service Corporation as a Loan Officer in 2000 and began blogging in 2006. Read More…

Mortgage preapproval


Pre-Qualification vs, mortgage preapproval.#Mortgage #preapproval


Pre-Qualification vs. Pre-Approval

Mortgage preapproval

Mortgage Q A: Pre-Qualification vs. Pre-Approval

When you initially set out to purchase a new home, the real estate agent(s) and home seller will want to know you can actually afford the thing. Heck, you ll want to know too.

After all, if you can t afford to buy it, you ll be wasting everyone s time. Aside from affordability concerns, you may find other issues that disqualify you from obtaining a mortgage (do I qualify for a mortgage?).

Agents and home sellers will also want to know that you re committed to buying a home, as opposed to those just casually browsing.

For these reasons, most real estate agents will demand that you get pre-approved before they even begin showing you prospective properties. Most agents have a mortgage contact they ll likely refer to you to get the ball rolling.

Tip: You can use this contact for your pre-qualification and pre-approval needs, but don t forget to shop around with other banks and brokers as well to ensure you obtain the lowest mortgage rate possible!

What Is a Pre-Qualification?

If you choose to finance the home purchase with a mortgage, you ll need to get pre-qualified first. A “pre-qualification” isn t as robust as a pre-approval, but it s a good first step to ensure you can purchase the home you desire (or any one at all).

A pre-qualification is a pretty straightforward, simple check to see what you can afford based on your income/debt levels (debt-to-income ratio), assets, down payment, employment history, perceived credit score, and so on.

You can get pre-qualified very quickly and easily with a bank or mortgage broker, but it won t carry much weight in the eyes of the agent or the seller.

After all, with a pre-qualification you re simply supplying estimates and your credit report probably hasn t yet been run (though it should be pulled early on in the process). That said, a pre-qualification, or pre-qual, is just a determination of what you d likely qualify for if you made an offer and applied for a home loan.

It s not necessarily a waste of time, but it s not going to get you very far. You can liken it to running a few numbers to see where you stand, but it cannot be used in place of a pre-approval.

What Is a Pre-Approval?

A pre-approval, on the other hand, actually has legs. It s a written, conditional commitment from a bank or mortgage lender that says you are pre-approved for the mortgage financing in question.

It comes only after filling out a loan application, supplying verified income, asset, and employment documentation (assuming these items are necessary), running credit, and underwriting the loan file.

Acquiring a pre-approval shows the interested parties (sellers, agents) that you re a committed buyer, boosting your chances of sealing the deal at the price you want. It will also show you how much house you can afford, not just an estimate.

How Long Is a Mortgage Pre-Approval Good For?

Once you provide all the required documentation and get the mortgage pre-approval letter from a bank or lender, it is typically valid for 60-90 days. Just note that a lot of things can change during that time, such as your credit score, so it s not 100% guaranteed.

Again, a pre-approval is not a guarantee that you will be approved for a mortgage. Otherwise it would just be an approval. And even an approval is still conditional on you meeting a series of requirements set forth by the lender.

If things do change dramatically, or even a little bit, it won t matter if the pre-approval is just a few days old, as material changes can affect the outcome of your approval.

For example, if your credit score falls below a key threshold, like from 620 to 618, you could be denied after getting your pre-approval letter. It s not the bank s fault either, it s just an unfortunate turn of events.

Same goes for anything the underwriter sniffs out during the approval process. They get a lot more involved and may find things that were initially missed.

When it comes down to it, an approval is never a sure thing until the mortgage is funded and closed!

As you can see, being pre-approved and pre-qualified are not the same thing, so make sure you know the difference before shopping for a home.

Do You Need a Pre-Approval Letter to Make an Offer?

At the end of the day, you don t necessarily NEED a pre-approval letter to make an offer on a piece of property. But nowadays, with so few properties on the market, and so many multiple-bid situations, it s often a requirement just to hear back from the seller s agent.

Sure, you can tell your real estate agent to tell the listing agent that you ve got an 800 credit score, $1 million in the bank, and a job that pays you $500,00 a year. And they might say fine, skip the pre-approval.

But chances are that s not your financial profile, so just to play ball and keep everyone happy, it often makes sense to get the pre-approval done. It will also strengthen your offer.

And as I alluded to earlier in this post, it s good to know where you stand as well. You might think you re a sure shot at getting a mortgage, but surprises aren t all that uncommon and mortgage guidelines change all the time.

So a pre-approval could actually save you time and money, despite being a task that needs to be taken care of upfront. It shouldn t take very much work to get one anyway.

There are brokers and lenders that can get you one the same day, or even within a few hours, thanks to new technologies that are able to automatically verify things like your credit scores, employment, income, and assets.

Just remember not to feel obligated to use the bank that furnishes the pre-approval letter for you! It s entirely possible to go elsewhere, and even use the letter to get a better offer from a different lender.

Next Step After Pre-Approval

The next step after receiving a mortgage pre-approval is to either apply with the lender who provided it or apply for the loan elsewhere. You can certainly shop around and decide which company is the best fit.

Once you ve selected a lender, you ll need to sign disclosures and express your intent to proceed with the loan application. The lender will then begin collecting paperwork and signatures, including the purchase contract, in order to process the loan.

It will eventually land on an underwriter s desk for full approval, at which point a list of conditions will be generated (if applicable) in order to fund the loan.

You will also be given an opportunity to lock your loan early on so the interest rate you are quoted won t change.

To summarize, the difference between a pre-qualification letter and a pre-approval letter (for you lazy readers):

  • First step
  • Less robust
  • Based on estimates
  • Doesn t require a credit pull
  • Carries less weight/ not a sure thing
  • Not taken seriously
  • Based on verified information
  • Must complete an actual loan application
  • Requires a credit pull
  • Must be underwritten (manual or automated)
  • Written conditional commitment
  • Shows sellers/real estate agents you re serious

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Get Preapproved for a Mortgage

Know Your Price Range

Don’t waste time shopping outside your budget. A preapproval tells you exactly what you can afford.

Make a Winning Offer

A preapproval shows sellers that you’re a serious buyer who won’t run into financing problems.

Get to Closing Faster

Get a head start on your application so you can put more of your focus on moving in to your new home.

Like What You See? Let’s Get Started.

How to Get Preapproved for a Mortgage

You can get preapproved online in minutes with Rocket Mortgage®, or you can get preapproved by calling a Home Loan Expert at (800) 251-9080. Here’s an overview of what you’ll need to provide no matter which way you choose:

  • Your personal information: We’ll ask for your name, contact information and information about anyone who will be listed on the loan with you, like your spouse.
  • Your desired location: Have a house in mind already? We’ll ask for the address. Not sure which house you want to buy? That’s OK too – just let us know what cities you’re looking in.
  • Your income information: We’ll need to know details about your income and employment situation.
  • Your assets and debts: In order to give you accurate numbers, we’ll ask about your assets (like savings accounts or property) and any debt you’re carrying (like credit cards, car loans, student loans or other mortgages). We’ll also check your credit at this time so we can give you an accurate interest rate.

If you have additional questions, you can chat with a Home Loan Expert or call (800) 251-9080.

Common Questions About Preapprovals

What’s the difference between a preapproval and a prequalification?

A preapproval takes a more thorough look at your finances than a prequalification does. Because a preapproval involves a review of your credit history, income, assets and debt, it is a surer estimate of how much you can get approved for.

What is a preapproval letter or PAL?

A preapproval letter (PAL) states how much you can get approved for and what your interest rate will be. Once you’re preapproved, we’ll create a preapproval letter that you can download and print.

Does a preapproval letter guarantee what I can get approved for?

A preapproval letter is a first look at what you can expect to be approved for. Once you’ve found a home and your offer has been accepted, we’ll complete a formal underwriting review, or a more thorough review of your home loan application and finances.

How long does it take to get preapproved for a mortgage?

With Rocket Mortgage®, you can get preapproved for a mortgage in minutes. If you want to talk to a Home Loan Expert instead, you can usually get preapproved in just a phone call.

Does getting preapproved commit me to anything?

No. Getting preapproved does not mean you are obligated to get a mortgage with us or anyone else. We offer preapprovals as a service to help you know what you can afford.

Do preapprovals expire?

Preapprovals expire after 90 days. If you haven’t made an offer within 90 days of getting a preapproval letter, you can call your Home Loan Expert to renew it.

Will getting preapproved affect my credit score?

We’ll have to check your credit to preapprove you, and this can lower your score by a few points. However, if multiple lenders check your credit over a short period of time, the credit bureaus will count these inquiries as a single credit pull, and your score will only be lowered once.

It’s a good idea to stay on top of your credit history. You can track all your debts in one place and get your free credit report and score from QLCredit.

Should I get preapproved before working with a real estate agent?

We recommend getting preapproved first. Once you’re preapproved, it will be easier for your real estate agent to know what you can afford. If you need help finding a real estate agent, our sister company In-House Realty can connect you with an expert in your area.

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We’ll help you understand the details so you get the right solution based on your goals. See how we make things simple for our clients.


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Preapproval

Key Benefits

With a Quicken Loans preapproval, you’ll know how much you can spend on a home so you can save time with a focused search.

  • It’s a smart financial move! We’ll find out what you qualify for and what payment you’re comfortable with. This can eliminate any unpleasant surprises before you close on your new home.
  • You get negotiating power with a stronger offer, especially when competing with other buyers.
  • You get extra help from America’s Home Loan Experts, with online guides, calculators, news articles and timely newsletters – personalized to help you understand exactly what’s going on based on where you are in the home buying process.

Close faster when you have a Quicken Loans preapproval.

  • As a Quicken Loans client, you could close on your home in just weeks, rather than months. It’s another advantage you’ll have over other buyers, and takes much of the stress out of buying a home.
  • Even if you’re not a first-time home buyer, the preapproval process speeds your application through the process so you can enjoy a smooth closing.
  • Already made an offer on a home? No problem! We can jump-start your closing and speed you into that new home. Get peace of mind knowing your loan will close with fewer surprises.

*With a Quicken Loans preapproval, your mortgage will close subject to satisfactory title and appraisal, and your financial situation staying the same.

How It Works

The Easiest Way to Get a Home Loan

Four Easy Steps to Becoming a Homeowner:

Step 1: Get preapproved.

You’ll know exactly how much home you can afford based on your real credit score and the home loans available.

Step 2: Find your agent, find your home.

A real estate agent can be a valuable asset in finding just the right home. Whether you’re already working with someone or want a referral from our partner, In-House Realty . we’re here to help.

Step 3: Get your mortgage.

Once you find a home, simply contact your Home Loan Expert to complete the Quicken Loans preapproval process. Our streamlined mortgage application process and unmatched customer service make this the easiest step. Most of the work is already done!

Step 4: Move in.

The closing is just the beginning of your relationship with Quicken Loans! Monitor your credit score, understand your complete credit report and track all of your debts in one convenient place with our sister company, QLCredit. You’ll get visibility into how your debt is impacting your credit score, and other savings opportunities.