Posted on: 08th Mar, 2007 10:46 am
is there any difference between getting pre-qualified for a loan or a pre-approval, and does it mean the same as loan commitment…
Hi Sparnaay,
Welcome to Mortgagefit forum.
Pre-qualification is different from a pre-approval. A loan pre-qualification does not normally include analysis of your ability to buy a home or checking your credit report. The term means that someone (a lender or any real estate agent) has taken a general look at your income & expenses to give you a general idea of the price range in which you would be able to afford a home.
While in pre-approval lender closely looks at your income and credit report to determine whether you would be able to qualify for a loan. Lender would give you an estimate of the loan amount he would be able to provide, the loans you qualify for & the interest rates he can offer for different types of loans. But a pre-approval is also not a guarantee that lender will approve your loan.
A loan commitment is the surety that the lender will provide the loan.
But a lender will only issue a loan commitment after both the house & your details are approved. If you are required to put a loan commitment date on your purchase offer then make sure that the specified date provides plenty of time to cover the requirements that a lender make ask for. Before providing the loan commitment the lender would ask for home appraisal, title search, checking of your credit report and similar requirements to be fulfilled. So if on a purchase offer you need to provide the date for a loan commitment, estimate the time it may take to get the loan commitment before putting down any specific date.
Feel free to ask anything else you might be having difficulty in understanding.
Colin
Welcome to Mortgagefit forum.
Pre-qualification is different from a pre-approval. A loan pre-qualification does not normally include analysis of your ability to buy a home or checking your credit report. The term means that someone (a lender or any real estate agent) has taken a general look at your income & expenses to give you a general idea of the price range in which you would be able to afford a home.
While in pre-approval lender closely looks at your income and credit report to determine whether you would be able to qualify for a loan. Lender would give you an estimate of the loan amount he would be able to provide, the loans you qualify for & the interest rates he can offer for different types of loans. But a pre-approval is also not a guarantee that lender will approve your loan.
A loan commitment is the surety that the lender will provide the loan.
But a lender will only issue a loan commitment after both the house & your details are approved. If you are required to put a loan commitment date on your purchase offer then make sure that the specified date provides plenty of time to cover the requirements that a lender make ask for. Before providing the loan commitment the lender would ask for home appraisal, title search, checking of your credit report and similar requirements to be fulfilled. So if on a purchase offer you need to provide the date for a loan commitment, estimate the time it may take to get the loan commitment before putting down any specific date.
Feel free to ask anything else you might be having difficulty in understanding.
Colin
that was really helpful, if allowed I would certainly like to ask one more thing, it is form 4506, I do not have much idea about what it is and what it is used for or how it can help me...I be thankful for the support
Sparnaay, you can ask as many question as you like, you need not ask for permission.
Now about the question you have asked regarding Form 4506. Actually this form is not for your help but for the lender. It is used to verify your income.
While signing the mortgage application you are required to specify true income information and give proof by way of your pay stubs, W-2 forms and tax returns. Form 4506 helps the lender to compare details provided to IRS about your income with what you told him.
This form allows the servicing mortgage lender to obtain a complete copy of your tax returns to make a comparison with what you stated on the mortgage application. You are required to sign this form to give permission to the lender to access your records with the IRS.
Colin
Now about the question you have asked regarding Form 4506. Actually this form is not for your help but for the lender. It is used to verify your income.
While signing the mortgage application you are required to specify true income information and give proof by way of your pay stubs, W-2 forms and tax returns. Form 4506 helps the lender to compare details provided to IRS about your income with what you told him.
This form allows the servicing mortgage lender to obtain a complete copy of your tax returns to make a comparison with what you stated on the mortgage application. You are required to sign this form to give permission to the lender to access your records with the IRS.
Colin
Do not sign and return the blank form to lender. Fill up the required details and then only return it to lender.
State on the form that lender should only be allowed to access your tax returns for the last 2 years only and not more than that. Otherwise he would get access to check your tax returns for more than this period, which should not happen.
State on the form that lender should only be allowed to access your tax returns for the last 2 years only and not more than that. Otherwise he would get access to check your tax returns for more than this period, which should not happen.
There are instruction on Form 4506 for the consumer to sign and date the form. The date is important as such a form is only valid for a period of 60 days after it is signed and dated.
Lender can only obtain your tax returns within 60 days from the date mentioned on the form. According to IRS this rule has been made to limit any potential privacy abuse.
Always sign & date the form and specify the tax years that the lender would be authorized to check. If you do not clearly mention the tax years to be checked or put the date from which the authorization starts then lender can gain access to your confidential income and tax information for more than the stipulated 60 day limit and possibly misuse the information.
David
Lender can only obtain your tax returns within 60 days from the date mentioned on the form. According to IRS this rule has been made to limit any potential privacy abuse.
Always sign & date the form and specify the tax years that the lender would be authorized to check. If you do not clearly mention the tax years to be checked or put the date from which the authorization starts then lender can gain access to your confidential income and tax information for more than the stipulated 60 day limit and possibly misuse the information.
David