Mortgage Pre-Approval: What You Need to Know
Mortgage preapprovals are meant to serve as both an estimation, as well as an assurance when you are looking for house loans. If a mortgage is in your plans for the near future, here’s everything you need to know about them.
What is Mortgage Preapproval?
An authentic mortgage preapproval offer will in most cases be delivered in the form of a mortgage preapproval letter. Among other things, it will state at least the following facts:
- You are preapproved for a house mortgage loan from the lender’s end.
- The maximum loan amount which they are willing to lend for the mortgage.
- The interest rate they will be charging, which will vary depending on the selected tenure and the loan amount.
- The steps you will need to follow to get the house loan.
- The documents you will need to provide before the loan is confirmed.
Is the Mortgage Preapproval Letter a Confirmation?
Unfortunately, receiving a mortgage preapproval letter is not a confirmation of facts, but it should be taken as a calculated offer made by the lender. Lenders may at times use language that might convince you otherwise, but note that a preapproval letter does not guarantee that your house loan request will be confirmed. It also does not guarantee that the maximum loan amount and the interest rate mentioned will stay the same as what was mentioned on final approval.
However, if you do receive a preapproved mortgage loan offer from one of the reputed Pennsylvania mortgage lenders in your area, it’s the first step towards getting that final approval. As long as it comes from an authentic party, it does show intent on their end to approve the house loan.
When is a Preapproved Mortgage Offer Withdrawn?
In most cases, the house loan will be approved after due process, but minor changes might be made to the terms mentioned in their mortgage preapproval letter. There may be room for negotiations during that time as well.
A preapproved house loan could be withdrawn without notice if the documents previously and thereafter submitted are found to be suspiciously inaccurate. Minor inconsistencies can be worked around, but not if they are found to be willful.
The loan offer may also be withdrawn if any contradictory circumstances develop later. Common examples include loss of job or income, a loan taken after the preapproval letter was issued, a divorce, legal trouble, imprisonment, and other factors that can or may already have affected your previous financial standing.
Is a Mortgage Prequalification the Same as a Mortgage Preapproval?
Technically, they are both calculated offers and it’s not uncommon for mortgage lenders to use them synonymously. However, they may not always mean the same thing. Sometimes, a prequalification letter or email indicates that you are being checked for preapproval.
It largely depends on the lender and how they use these two terms. In general, though, consider a mortgage prequalification letter to be a precursor and a sign of the mortgage preapproval process getting started on the lender’s end. Rest assured that if you have received either, they have already cheeked your credit details and found themselves interested in extending an offer.