Unless you work in the mortgage industry, the terminology can quickly become confusing and overwhelming. In this article, we shed a bit of life on a few terms.
Mortgage Pre-Approval and Your Sanity
Whether you are seasoned borrower or a first timer, there is one inherent problem with the process of getting financing for a property purchase. The terminology used in the industry can simply be maddening and utterly confusing. This confusion can lead to you taking steps that may not be what you think they are when the critical moment of your home purchase comes due.
If you are considering the purchase of a home, it is important to understand there is a very significant time limitation involved. The agreement to purchase a property always comes with an escrow period during which the issues related to the transaction are addressed. These issues can include home inspections, title inspections and the transfer of the payment amount. All of these items need to be concluded in a satisfactory manner by the end of closing. If they are not, the deal falls through.
When seeking financing for a home purchase, it is important to understand escrow is typically 30 or 60 days. This effectively means you must have your financing in order by the end of the period in question. Even if you have stellar credit and make a ton of money, lenders are not exactly the quickest group when it comes to getting things done. Unless you address your financing needs prior to agreeing to the purchase of a home, you are going to be stressed out while you wait for the lender to work its way through your loan application and approve your financing. This can often happen a day or two before the closing of escrow, which leads to many sleepless nights on your part. It need not be this way.
If you wish to remain sane when obtaining financing, you need to get pre-approved for financing. Pre-approval is exactly what it sounds like. You approach a bank and apply for financing. The bank does a full work-up on you and approves you for a certain amount of money. The bank also provides a written statement that it will definitely loan you this amount of money for 30, 60 or 90 days.
Now you know exactly how much you can borrow and can go house hunting with confidence. When you subsequently reach an agreement on the home, you can sleep peacefully knowing you already have your financing in place. Trust me, it will keep you sane.
Raynor James is with the site - FSBOAmerica.org - mortgage loans for your home purchase.
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