Once you’re ready to purchase North Shore real estate, or any real estate for that matter; knowing the basics of prequalification and preapproval can be a financial and time preserving benefit for all involved.
There are different stages of the mortgage approval process, and it’s important to know what they are and what they mean. The breakdown below will shed light:
Prequalification is a lender’s estimate of how much you could be eligible to borrow based on information you supply. Prequalification does not mean you will get the loan. Prequalifications are usually free. The standard questions a lender will ask or use to start to process:
- Does the prospective buyer have enough money to make a down payment and cover closing costs? Ideally, a buyer should have 20 percent of the home’s price as a down payment and between 2 and 7 percent of the price to cover closing costs.
- Is the prospective buyer’s income sufficient to afford your home? Ideally, buyers should spend no more than 28 percent of total income to cover PITI (principal, interest, taxes, and insurance).
- Does the prospective buyer have good credit? Has a review and/or correction to a credit reporting status occurred.
- Does the prospective buyer have too much debt? If a buyer owes a great deal on car payments, credit cards, etc., he or she may not qualify for a mortgage.
With a pre-qualification in hand, this often means that you have a rate hold for 30-120 days. However, this is not a guarantee. There will be a number of conditions attached to the pre-qualification before it is fully approved. At this stage the lender hasn’t even seen your mortgage application.
Preapproval usually means that the lender has reviewed a mortgage application and is ready to process a mortgage loan based on the information and documentation you provided at the time you requested a preapproval. The preapproval will say how long it is valid for and may contain some other conditions for you to get the loan. Your lender may not require that you pay any fees except the cost of a credit report at the time processing starts. More information HERE
Our Glencoe, Illinois; top ranked Coldwell Banker Residential Real Estate office can be a source to depend on for mortgage lending needs. Stop by today and we can guide you through various options for buying and selling North Shore real estate. We are a trusted member of the community, and have been for over 40 years; located at 640 Vernon Ave in the heart of downtown Glencoe.