Understanding the Pre-Approval Process & Mortgage Rates in today’s Rea

Understanding the Pre-Approval Process & Mortgage Rates in today’s Real Estate Market

Navigating the ups and downs of Mortgage Rates can be a confusing process. It is difficult to know what causes rates to increase or decrease, and what that means to you, whether you are considering buying a home or refinancing.

Loan shopping is as intricate a process as house shopping, and the terminology is often confusing. The terms "pre-qualification" and "pre-approval" sound like the same thing, but they're not. And in fact, neither pre-qualification nor pre-approval means a bank actually has to give you the loan.

You will need to understand a few key points:

• Pre-qualification is the first step you can take -- but it's not mandatory.
• Pre-approval is more involved and usually requires an appointment. In this step, the lending institution gathers all the information it requires to offer you a loan, and your credit report will be checked.
• The result of the pre-approval process is the good faith estimate.
• Pre-approval does not mean the bank guarantees you the loan. It just means that you're approved to get loan -- unless something goes wrong. Commitment to the loan generally comes after the bank has had the house in question appraised to make sure the price you're paying isn't higher than the home's market value.

A copy of your most recent bank statements (this includes your daily checking account as well as any money market, savings or other accounts)

•Your most recent W-2 (or entire tax return if you're self-employed)

•Proof of IRAs or retirement accounts and their current balances

•Ditto for any stocks or mutual funds you own outside of retirement accounts

•Your driver's license

•The most recent month's paystub(s) from your job

•An application fee (this depends on the lender)

Questions to Ask Your Lender about Mortgage Rates

* What is the current interest rate, and what rate are you offering? How did you arrive at that rate?

* Will the rate change over the life of the loan? If so, how much?

* What is an adjustable-rate mortgage? What would that look like for my loan?

* Will my rate be locked in? Does that cost me? And how long will the rate be locked in?

* What will my Annual Percentage Rate (APR) be? This is the amount that includes your rate and all other finance charges.

* Is this the best possible rate for my credit score?

There are many other factors to consider when deciding on a loan. These questions will help you start those discussions and will help guide you through this pre approval process and understanding the best mortgage program for you.