Pre-Qualified and Pre-Approval meaning

General 20 Feb

Pre-approval and Pre-qualification difference 

In order to move next step in the process of home buying and mortgage, there are many points need to complete by buyers. All the buyers should move ahead to buy a property after he/she gets confirmation from mortgage broker regarding pre-approval or pre-qualification. As long as realtor is working on property regarding offer, buyer should never give any offer to realtor.image1.png

Term pre-qualification is when broker completes mortgage application and informs you that how much they can afford.

Term pre-approved means lender confirms in written to buyers that shows how much lender is willing to lend the money based on application and buyers credit history.

Pre qualification is only based on experience and/or knowledge of bank representatives or mortgage broker. On the other side, pre approval means the willingness of lenders to lend you money.

For example, Sams says that he is pre-qualified that means broker or bank representative has taken mortgage application and they can afford particular amount on home. Particular amount could be “XYZ”. If Sams says he has pre approval that means according to his credit history, income declaration and presented assets, lender will lend him “XYZ” amount of mortgage on stated property.

Rate hold is another term need to understand. It comes generally with pre approval application where lender can hold the rate for 120 days if you move ahead to purchase a home within 120 days, lender will offer you the same rate even rate goes up. If rate goes down, lender can offer you even lower rate whatever is in your benefit.

As mortgage advisor, I will suggest you to look for how much you can afford by pre qualified and once you know your affordability, look for pre approval before you make any offer with realtor.

If you have any doubt regarding pre-qualification, pre-approval or rate holding, you can contact me by call or write me your contact info and I will get back to you as soon as possible.

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Difference between High Ratio and Conventional Mortgage

General 17 Feb

When lender refers the term name loan to value(LTV) ratio, that means it could be either high ratio or conventional ratio.

Firstly, loan to value(LTV) means value of mortgage in relation to total value of property. For example if your property value is $500000 and your mortgage value is $400000, your loan to value(LTV) is $400000/$500000*100=80%.This is clearly mean to down payment paid by you is 20% a total $100000.

High Ratio Mortgage means your LTV is more than 80% that means your down payment is less than 20%.If you are doing less than 20% down payment, you are required to have Mortgage default insurance by law in order to help lender to insure their money when you are not able to maintain mortgage payments regularly.

In contrast to that, Conventional Mortgage doesn’t require any mortgage default insurance as you are doing more than 20% down payment. LTV ration is less than 80%.

Above terms apply only when you purchasing a property. But if you are refinancing your home or borrowing against your equity, lenders can not allow you to lend money which has more than 80% loan to value ratio. In other word if you want to refinance of equity take out, you need to own 20% or more of your property value.

If you are purchasing rental property, you are required to put 20% or more down payment because you can not borrow high ratio mortgage on rental property.

High ratio mortgage and conventional mortgage also effect your rate of interest as most lender incentives high ratio buyers to work with then my offering lower interest

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There are several categories in terms of high ratio and conventional mortgage in terms of borrowing powers. For more information on this, please send me en email and Dominion Lending Center will happy to help you.