Home loan qualification makes home hunting process that much simpler, especially for first time home buyers.
By: Phoenix Lee/
There’s a lot of talk about home loan qualification by mortgage brokers and real estate agents. There is a difference between loan pre-qualification and pre-approval. Pre-qualification, which in today’s marketplace is usually done by mortgage brokers, means working with the buyer to determine how much they can afford and which loans are the most likely to be available to them.
Home loan qualification can save a buyer time and money, and can even be a bargaining tool with a seller, however, it is not the same as loan “pre-approval”. The mortgage broker can often get the buyer a pre-qualification letter. Pre-approval means that the lender has definitely committed to lending the buyer money once the house itself is approved. Since it is a much stronger pledge, it is a much more valuable negotiating tool.
Only a lender can give pre-approval, but your mortgage broker may be able to push through pre-approval from underwriters with as little as a phone call. So when you hear someone talking about “pre-approval” make sure that it is lender pre-approval.
Surveys indicate that a large number of potential home buyers count themselves out of the market because of widely-held myths about home financing. Some of the most popular myths include:
- home buyers need large down payments (more than is actually the case);
- the loan process works against younger people with insufficient upfront capital to be used for down payment;
- owning a home is more expensive than renting one; and
- with the higher Additional Buyer’s Stamp Duty (ABSD) and Loan-To-Value (LTV) checks, the chances of getting a mortgage are almost impossible.
Many qualified first-time buyers looking for home loan qualification, are were unaware of special programs designed especially to make a home affordable to them.
Several surveys have found that many people view the mortgage process as “difficult, stressful, and incomprehensible.” The home loan industry is always looking for new ways to dispel these myths because lenders want more business, not less. The alternatives to traditional 20% down, thirty-year fixed mortgages is astonishing. Mortgage brokers are experienced in explaining today’s financing and debunking the myths.
If you have found the perfect home in an area that you like, but are finding the perfect financing has become elusive; If after you completed the application process, your lender has turned you down, and you are upset; Can anything be done to turn around this setback?
It depends on why you were turned down and why you are not approved for home loan qualification.
If your income is too low to satisfy one mortgage company, there might be another company with more liberal qualifying guidelines. If you have had credit problems, some lenders may be more willing than others to help you clear them up in a manner that satisfies their underwriters.
If your loan runs into problems, sit down with a mortgage broker to investigate the possibility of using a different lender. The first company may be able to “assign” the package to a competitor, enabling you to use your same credit report and appraisal. You will need the cooperation of your sellers, too. While loan rejections are disappointing, they can have happy endings.
When shopping for home loan qualification, there is no harm in asking lenders or brokers if they can give better terms than the original ones they quoted or than those you have found elsewhere.
A home loan often involves many fees, such as loan origination or underwriting fees, broker fees, and closing costs. Every lender or broker should be able to give you an estimate of its fees. Many of these fees are negotiable. Some fees are paid when you apply for a loan, and others are paid at closing. In some cases, you can borrow the money needed to pay these fees, but doing so will increase your loan amount and total costs.
Once you are satisfied with the terms you have negotiated, you may want to obtain a written lock-in from the lender or broker. The lock-in should include the rate that you have agreed upon, the period the lock-in lasts, and the number of points to be paid. A fee may be charged for locking in the loan rate.
This fee may be refundable at closing. Lock-ins can protect you from rate increases while your loan is being processed; if rates fall, however, you could end up with a less-favorable rate. If that happens, try to negotiate a compromise with the lender or broker.
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