Obtaining financing for your new home can be one of the most confusing parts of the building process. In this blog, we spoke with one of our preferred lenders to find out more about obtaining pre-approval for your mortgage and beginning the home loan process.
CMH: What is the difference between "Pre-Qualifying" for a mortgage and obtaining "Pre-Approval?"
Mortgage Lender: There is a great difference between the two. Pre-Qualifying is when you speak with a lender either over the phone or in person and give him/her verbal information about your income, sources of income, and a credit review is done. No formal documents are presented. With a Pre-Approval, the borrower presents all financial documents to the lender - bank information, w-2, tax records, credit reports, etc. The information is reviewed by the underwriter with the mortgage company and they can tell you the maximum amount the lender is likely to loan you. Note: A pre-approval doesn't necessarily mean you can lock in your rate. Your final rate is dictated by your closing date.
CM: This seems like a great benefit for a home buyer. What other benefits does a Pre-Approval offer?
Mortgage Lender: It really takes the mystery away from the mortgage. They will know accurate details for all costs associated with their loan. No surprises! Working with a preferred lender offers other benefits as well. Interest rates can be locked-in if the buyer chooses to do so, and a preferred lender can offer more options for rate lock-in and for the overall cost to the borrower.
CM: There are a lot of tools online that buyers could use to calculate their mortgage, just by typing in a few numbers. Why not just use an online calculator to get an idea of what to expect?
Mortgage Lender: Online calculators cannot give you the entire picture of what to expect in your mortgage. There are costs such as insurance, closing costs, taxes, and other monthly costs that only a resource like a preferred lender can make sure you are aware of. A preferred lender is a professional who will be a resource for you while you are in the process of building your home. Preferred lenders also work with appraisers who are experienced in appraising new home construction.
Thanks to our lender for that great information on the first steps in the process of securing a home mortgage.