Rate Holds, Pre-Approval and Pre-Qualification for Mortgages
First time home buyers have many questions in terms of mortgages and what it takes to buy a property. Home buyers are looking for information about rate holds, pre-approval, and pre-qualification.
Mortgage Pre-Qualifications
The first step in the home buying process is to get a mortgage pre-qualification. This is done before the mortgage pre-approval process. The process for pre-qualification is quite a simple process. You supply the lender with your financial information, debt load, and assets. The process is quick and easy, and this can be done through the Internet or on the phone and won’t cost you anything.
The pre-qualification doesn’t look at your credit rating or give you a detailed analysis if your ability to afford a home. During the pre-qualification, you can talk to the lender about the goals or needs that you have. You will learn about mortgage options and rates that might work for your situation. The pre-qualification will give you an estimate of the mortgage amount that you’re likely to get approved for.
Mortgage Pre-Approval
The mortgage pre-approval process will take a detailed look at your current financial situation. You will get information about the home value that you can afford based upon your finances and savings. An official mortgage application and other documentation will be presented to the lender. Your financial situation will be assessed as well as your credit rating to ensure that you can meet the requirements. If you look at your credit report more than three times within a six month period it can lower your credit rating so be sure that you only look at it once or twice before you apply for mortgage pre-approval. You can talk with a mortgage broker to start the process of approval.
During the pre-approval for a mortgage, you may sometimes get a mortgage rate guarantee for a length of time the gives you protection from rate increases that may occur. You usually don’t have to pay for this and you’re not obligated to the mortgage broker or bank form whom you received your mortgage pre-approval. Once the process is over you will get in writing a conditional commitment for the loan amount. This helps you look for a home at that price level or below it. The person that wants to sell the home will know you have mortgage pre-approval, so it should be easier to work out a reasonable price for the home you seek which is ideal since the market can be so competitive.
Mortgage Rate Hold
When there is a rate hold, this locks in a specified mortgage rate for a time which is usually 120 days, but it can be 90, or even 60. The rate hold applies to the fixed rate mortgage as the variable rate will fluctuate base don the market.
A mortgage rate hold can vary depending on if you get it through a mortgage broker or a bank. When you work with a bank you’re able to lock in the day’s mortgage rate for a specified time. If you go back to the bank within this time, then you get the rate that you locked in.
A mortgage broker usually tries to lock in several mortgage rates with different lenders. These rates will have different rate holds. Some brokers may wait 24 hours to see how mortgage rates are changing so they can maximize your rate hold. You should examine all options if you want to buy a property within the short term as a rate hold requires you to think ahead.
If the mortgage rate goes up within the hold period, you get the locked-in mortgage rate. If the rate declines, then you still get to access the lowest rate on the market. A rate hold will guarantee that you get an interest rate for a specified time, but this isn’t a confirmation that the lender is going to approve your application for a mortgage. If you don’t meet the lender’s criteria, then you still can be declined for the mortgage. You should get a mortgage pre-approval which ensure that you meet the requirements. When you get a mortgage pre-approval, you will be able to get a rate hold.
Summary
Talk to your mortgage broker or bank about rate holds, pre-approval, and pre-qualification to determine your needs and how they can help you buy your home as a first-time home buyer.
