A pre-approved mortgage is a assurance from a lender to provide a mortgage loan on confirmed terms to a borrower before he or she has found a property that they want to purchase. The provisions in a pre-approved mortgage enable the borrower to make a cash offer on the property of choice to the seller of the property.
As the pre-approved mortgages are basically no-cost transactions, they are well accepted by nearly all conservative loan providers like credit unions, banks and trust organizations. In fact, many lending firms also provide the loan applicants found eligible for the credit with documentation much similar to a credit card in appearance affirming details regarding the highest credit obtainable as well as the nature of the imbursements. However, there is usually one prerequisite in the case of pre-approved mortgages and this requires the borrower to provide the lender with an acceptable appraisal report of the property after it has been purchased. Here it may be noted that even after a lender has given his or her prior consent (pre-approved) to a borrower regarding a mortgage loan, the borrower does not have any commitment to deal with the same lender. If a borrower is able to secure a better offer from a lender he or she is free to book their mortgage with that creditor notwithstanding the fact that another lender had pre-approved their mortgage product.
A pre-approved mortgage is particularly advantageous when the interest rates in the market are on an upward trend as the borrower is able to book the mortgage on a lower interest fee that had been pledged by the lender beforehand. However, pre-approved mortgages have their downsides too and this includes a very brief guarantee period for the interest rates, which usually are valid for anything between 30 and 90 days subject to the prevailing market situation as well as the lender's policies. If they want to keep the interest rates fixed, it is essential that the borrowers finalize the process of arranging for new finances and people planning to purchase a new home need to come across a property, sign the sale deed and conclude the transaction. If this is not done, the borrower will lose the benefit of the previously pledged low interest rate and has to once more apply for the pre-approved mortgage. Hence, while looking for a pre-approved mortgage it is important to inquire from the lender guarantee period of his or her loan rate. You must ascertain beforehand whether the rate promised by the lender will be effective from the date of applying for the mortgage or the date when the mortgage is finally sanctioned. In addition, the borrower must also give a thought to the fact as to when the interest rates are like to go up in the market.
It may be mentioned here that pre-approved mortgages are considered to be very vital and inventive aspects in the business of offering loans against property. Nevertheless, it is surprising to note that despite their many attractive features, at times pre-approved mortgages may prove to be risky affairs. Although this may appear to be incredible, the fact remains that since pre-approved mortgages are normally close at hand and enable the borrowers to lead an easy and tension-free life, unless they are cautious, it is possible that the debtors may get enmeshed in unanticipated and expensive ensnares. Therefore, it is advisable for all mortgage shoppers to be careful and cautious before signing a pre-approved mortgage.