September 6th, 2016
One of the best ways to simplify your mortgage shopping experience is to obtain a pre-qualification using a mortgage broker. A pre-qualification is one of the first steps in the mortgage approval process, and it usually involves answering some basic questions about your ability to repay any financing.
Prequalification vs. Preapproval
However, getting prequalified for a mortgage and receiving a pre-approval from a lender are two different steps in the process. A pre-qualification involves you and your mortgage broker engaging multiple banks and lenders to get a feel for how much they are willing to lend and at what interest rates. A pre-qualification from a lender or multiple lenders doesn’t guarantee you will receive financing. The amount the lenders quote you is only an estimate of what you may expect to receive if you’re approved for financing based on the basic information you and your broker provide.
Mortgage Pre-approvals in 2016
Although banks and mortgage lenders have drastically reduced their qualifications for pre-approval in 2016, this doesn’t guarantee that you will qualify. Remember, before a lender issues a pre-approval, they will conduct an extensive query into your history, including filling out an extensive mortgage application, checking your credit reports and current credit scores and calculating your debt-to-income ratios. Other factors include loan-to-value ratios and the lenders down payment requirements.
The differences between pre-qualification and pre-approval are far-reaching, and it is easy to see why you need a mortgage broker. 2016 is a great year to purchase a new home or refinance an existing mortgage due to historically low-interest rates. However, imagine trying to navigate your way through multiple banks and lenders trying to obtain a simple pre-qualification. Your mortgage broker works as your advocate, and he or she will help you narrow your search down to two or three quality lenders within their networks, and there you will find the lowest interest rates with favorable repayment terms.