Pre-Qualification vs. Pre-Approval

What is the difference between a Pre-Qualification and a Pre-Approval? A pre-qualification is a preliminary finding usually provided by a mortgage professional to a home buyer using information obtained during an interview. The mortgage professional asks the home buyer such questions has ...
1) What is your current gross income per month or year?
2) Where do you work? How long have you been with your current employer? What is your job description?
3) Are you self-employed, and if so, what has been your 'net income' average over the last two tax filed years?
4) What are your 'source of funds' for down payment, etc.?

The mortgage professional will also asked if they have permission to pull the home buyer's credit report w/ FICO score.

An analysis from the information provided to the mortgage professional by the home buyer (such as 'debt-to-come ratios, amount of available source of funds, FICO scores) will designated if the home buyer can purchase a home and to what amount in purchase price and loan amount the home buyer can obtain.

Usually, the analysis will not take long and if the home buyer is 'qualified' the mortgage professional will provide a letter of 'pre-qualification' to the home buyer stating the findings and the limits on what the home buyer can afford in a mortgage.

Basically, a pre-qualification is an opinion of the mortgage professional.

A 'Pre-Approval' is much more in depth. An actual 1003 (Loan Application) is completed and signed/date by the home buyer and provided to the mortgage professional along with the proof of 'source of funds' for the downpayment. Also, the mortgage professional will ask for the previous years tax returns and/or W2s along with the most recent 30 days of paystubs. With this information the mortgage professional can upload (or submit to a mortgage lender to upload) the 1003 with either Fannie Mae's Desktop Underwriting or Freddie Mac's Loan Prospector (these are not the only two automated underwriting systems used, but the most common). Once uploaded the mortgage professional obtains a detailed written analysis from Fannie or Freddie ... in seconds. The findings tell if the home buyers is 'Approve/Eligible' if Fannie Mae or 'Accept' if Freddie Mac (there are other approval levels). Usually sponsored by a mortgaqe lender, the mortgage professional can release the findings, and begin the loan process.

Seller's and Listing real estate agents prefer obtaining a Pre-Approval letter over a Pre-Qualification letter in that the pre-approval letter means (but does not guarantee) that the home buyer has a mortgage already in process and obviously pre-approved.

I do not charge any FEE whatsoever to do a 'Pre-Approval' for home buyers. If you required mortgage assistance and want to find out what you can obtain in a home purchase and mortgage give me a call or email.

Credit Crisis One Year Anniversary

One year ago today ... seems like it's gone by fast! Look at some interesting financial data comparing today to one year ago today.

OIL
today - $124.30
1 year ago - $78.20
GOLD
today - $917.60
1 year ago - $666.90
FED FUNDS RATE
today - 2.000%
1 year ago - 5.250%
30 YEAR FIXED MORTGAGE (up to $417,000)
today - 6.375% -0- points
1 year ago - 6.375% -0- points

DOW down 13%
Euro up 14% against the Dollar

Is it not curious that mortgage rates are about the same?

Housing Rescue Package

Congress is inching closer to a Housing Rescue Package for the beleaguered USA housing market. Two of the rescue plans efforts may very well alleviate some of the pains housing is experiencing, at least in the short tern.

1) First-Time Home Buyers who purchase a home between April 9, 2008 and July 1, 2009 will receive a one time $7,500 tax break.

2) Fannie Mae & Freddie Mac will have the ability to make larger loan amounts for borrowers, and obtain access to more credit (money) from the US government to help keep liquidity flowing for more mortgages.

I believe that the First-Time Buyer plan is an excellent one. It will almost immediately boost the housing market by providing more of an incentive for buyers to purchase homes. Probably close to four million buyers.

But, I have reservations about the Fannie/Freddie part of the rescue plan. Yes, it will provide short term relief to the tightened housing finance market, but at what long term cost? Our children and our children's children will more than likely be paying for this rescue plan in the years ahead.

Don't Believe What You Hear or Read About Mortgage Rates!

As I have mentioned to you many, many times in the past ... mortgage rates are very, very volatile. As a mortgage consultant it is frustrating to hear from clients "I read in the newspaper that mortgage rates have gone down!", or "Bankrate.com says mortgage rates have dropped!". Here's the thing about any report on mortgage rates, and that includes what you see on CNN, hear on the radio, or read in the newspaper ... they are always, as they say ".... a day late, and a dollar short."

Case in point ... Monday this week mortgage rates dropped from the previous week's high because the Fed and the US Govt. said they would back-up Fannie Mae & Freddie Mac and not allow them to fall. But, on Tuesday and the rest of this week reality came back in focus .... INFLATION ... and then mortgage rates jumped up. But, I kept hearing on the radio and seeing on TV that 'rates have dropped'.

This is why you need someone who can give you 'real time, right now' mortgage quotes. That's why you need ME!

Just look to the right side of my blog. Zillow Mortgage Marketplace is quoting 'real time' mortgage rates. See ... they've gone UP!

Do you know someone in need of a purchase mortgage or a refinance? Send them my way. Thanks.

Mike T.

Mortgage Rates - Tuesday July 15, 2008

CONFORMING LOANS (up to $417,000)
30 year fixed fully amortized
5.875% 1.25 points
6.000% 1/2 point
6.125% -0- points
30 year fixed w/ interest only option
6.125% 1.25 points
6.500% -0- points
15 year fixed
5.375% 1 point
3/1 ARM
5.375% 1/2 point
5/1 ARM
5.500% 1/2 point
7/1 ARM
5.750% 1/2 point

RATES SUBJECT TO CHANGE WITHOUT NOTICE.

What Is Happening to Fannie, Freddie and Indy?

What a day! I didn't even get a chance to post pricing on my blog today. Here it is in a nutshell: Fannie Mae and Freddie Mac, the two combined are THE largest mortgage lenders in the USA. Together they own 5 trillion dollars in mortgages. More than likely they own your mortgage debt. Earlier this week the New York Times put out an article basically saying that Fannie & Freddie were insolvent and in need of government intervention. To make matters worse, the NY Times article quoted a previous Federal Reserve official who said that Fannie & Freddie should go into conservatorship. Conservatorship would wipeout all preferred and common stock in both companies. So, you can guess what happened to their stock value today. Down, down, down. Of course the news media saw blood and jumped on this story saying credit will be even tighter, and foreclosures will increase. To top off all of this fun .... just a few minutes ago federal regulators seized the assets of IndyMac, one of the larger mortgage lenders in the US.

Let's all take a deep breath and get a grip. Fannie Mae & Freddie Mac may be insolvent according to standard accounting procedures ... but for goodness sake SO IS THE U.S. GOVERNMENT!!! The talking heads on CNN, ABC, NBC,etc. will be trying to scare the daylights out of you this weekend. I'm not as worried as they want me to be. Fannie & Freddie will get through this.

And, yes ... mortgage rates did go up today. But, don't believe CNN ... it's not as bad as they say.

If you know of someone that needs a mortgage (purchase or refinance) have them contact me. I will get them the straight story.

Blessings!

Mike

Mortgage Rates - Thursday July 10, 2008

CONFORMING LOANs (up to $417,000)
30 year fixed
6.000% 1 point
6.125% 3/4 point
6.250% 1/4 point
6.375% -0- points w/ $300 credit
30 year fixed interest only
6.250% 1 point
6.375% 3/4 point
6.500% -0- points
15 year fixed
5.500% 1 point
5.625% 3/4 point
5.750% 1/4 point
5/1 ARM
5.375% 1 point
7/1 ARM
5.625% 1 point

RATES SUBJECT TO CHANGE WITHOUT NOTICE.