What’s Included In A Pre-Qual Letter?
Let’s start with the most commonly asked question about mortgage loans. Getting a Pre-Approval Letter for a new home purchase is mainly to let everyone involved in the transaction know what type of mortgage money the buyer is approved to borrower from the lender.
The Pre-Approval Letter is based on loan program guidelines pertaining to a borrower’s DTI, LTV, Credit, Property Type and Residence Status.
A complete Pre-Approval Letter should let the borrower know the exact terms of the loan amount, down payment requirements and monthly payment, including principal, interest, taxes, insurance and any additional mortgage insurance premiums.
Keep in mind, one of the most important items to remember when looking into financing is that there is sometimes a difference in the amount a borrower can qualify for vs what’s in their budget for a comfortable and responsible monthly payment.
7 Items to Look For On a Pre-Approval Letter
- Loan Amount – Base loan amount and possibly gross loan amount (FHA, VA, USDA)
- Status Date and Expiration Date – Most Pre-Approval Letters are good 90 days from when your credit report was run
- Mortgage Type – FHA, VA, USDA, Conventional, Jumbo
- Term – 40, 30, 20 or 15 year fixed, ARM (Adjustable Rate Mortgage); if ARM, 1, 3, 5, 7 or 10 year initial fixed period; Interest Only
- Occupancy – Owner Occupied, Secondary Residence, Investment
- Contact Info – Lender’s Name and Address
- Conditions – Document and Funding requirements prior to Approval