Before you begin to shop for a new home, you should set up a time to meet with me so we can figure out how much you can afford. This will put you in a better position as a buyer. That’s when it is important to understand the distinction between being pre-qualified for a loan and pre-approved for a loan. The difference between the two terms will be crucial when you decide to make an offer on a house.
To get pre-qualified for a loan, I will collect information about your debt, income, and assets. We’ll look at your credit profile and assess goals for a down payment and get an idea of different loan programs that would work for you. I will issue you a pre-qualification letter indicating the amount you are pre-qualified to borrow.
It is important to understand that a pre-qualification letter is just an estimate of what you are eligible to borrow, not a commitment to lend. Getting pre-approved for a loan gives you competitive advantage when the time comes to bid on a home because you have been approved for a loan for a specified amount.
To get pre-approved, you will complete a mortgage application and provide me with various information verifying your employment, assets and financial status such as W-2 forms, bank records and credit card statements. We’ll review your mortgage options and submit your application to the lender that best meets your needs. Once the application process is complete you will receive a pre-approval letter indicating the amount your lender is willing to lend you for your home.
A pre-approval letter is not binding on the lender; it is subject to an appraisal of the home you wish to purchase and certain other conditions. If your financial situation changes (e.g. you lose your job), interest rates rise or a specified expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly.
Looking to get pre-qualified or pre-approved? Contact Don Spears with Executive Lending Group at (405) 615-8543.
Some of the "cash needed to close" as it's sometimes called includes settlement costs and fees, prepaid interest, escrow reserves, state or local government charges, or even extra funds needed to pay off your existing mortgage. Some or all of those costs can sometimes be financed as part of your new mortgage loan.
But you have to be careful. It's not always the case that you can borrow up to 100 percent of your home's value. Many loan programs are based on what's called a "loan-to-value" ratio. You may qualify for a very advantageous refinanced mortgage if you borrow no more than 80 percent of your home's value, but may not qualify for the same terms if you borrow 90 percent. We can help you qualify for refinance loan programs for as much as 95 percent of your home's value in most cases, but the lower your loan-to-value ratio (that is, the less you borrow), the better terms you'll generally qualify for.
The bottom line is that in many cases you can reduce your up-front costs for refinancing your mortgage in exchange for higher monthly payments for the life of the loan. But whether, and to what extent, you can do this depends on the value of your home and the amount of your new mortgage, and what options you decide are best for you.
If you've had your current mortgage for a few years, chances are you've built up enough equity to finance cash needed to close and still have a smaller loan balance than your original -- and a balance that will qualify you for a favorable mortgage program tied to your loan-to-value ratio. We can help you decide!
Many people find that it's advantageous to pay the cash needed at closing from checking, savings or money market accounts or from other assets. This is because the less you borrow on the new refinanced loan, the lower your monthly payment will be. But we'll work with you to see if there is an advantageous refinancing program for you based on your ability and willingness to pay closing costs and other fees and the amount you wish to borrow.
We want to make the best loan for you, work for you! Call Don & his team at (405) 615-8543 and let us help you get the right loan for your needs & wants!