• About
  • Mortgage Basics
  • $40K Challenge
  • Aunt Doris
  • Grandfather Says
  • Privacy
  • Archives

Len Penzo dot Com

The offbeat personal finance blog for responsible people.

Why Getting Preapproved for a Home Loan Is Important

By Enero Febrero

home for sale signBuying a home is always a stressful time and you’re going to want to make sure you have the funds for closing on your dream property.

The best way of making sure your funds are in place to transfer when your house purchase closes is to follow the optimum house purchase procedures. One of the most important of these procedures, with regard to financing, is preapproval.

What exactly is preapproval and why is it important?

Preapproval should not be confused with prequalification. To get prequalified it is often only necessary for you to call or email the home loan company. You provide the details of your overall financial situation, including your earnings and debts. In return the lender will give you an idea of how much you may be able to borrow. It should be noted that there is no check conducted on your credit rating at this stage so there is no guarantee you will receive the loan amount quoted.

On the other hand preapproval is a far more involved process. If you want your money for your house purchase to be available as soon as possible it is always a good idea to get pre-approved. You will need to complete an application form and often you will also need to pay a fee.

The lender will then complete extensive checks on your financial situation in order to give you a more substantive quote on the amount you are able to borrow. Sometimes you will also be told what interest rate you will have to pay; on occasion you are able to lock this rate in.

Now you can buy a house

After you’re preapproved, you then know the price range of homes to look for. And you can do so safe in the knowledge that you’ll have the money in place when the sale goes through. Of course, there’s still the chance that a property check may bring a different set of problems, but at least you know what you can afford based on your personal circumstances.

To ensure that you’ll have your home loan money in time, make sure that your loan commitment date is nearer to the date of closure than it is to the date of offer. The loan commitment date is the day on which the lender recognizes that they have completed all of the necessary checks, including a check on the appraised value of the home you’re buying. You also need to make sure that they’re committed to pay the amount for which you’ve been preapproved.

Remember, it’s important to allow sufficient time for the lender to make all the necessary checks, and confirm your home loan payment. Doing so will ensure that your home loan funds will be available when you need them to cover the purchase price.

Photo Credit: Casey Serin

Leave a Comment December 24, 2019

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

The Question of the Week:

Are you a better or worse financial manager than your parents?

View Results

Loading ... Loading ...

Recent Posts

  • Black Coffee: Out to Lunch
  • How to Set Up a Proper Gambling Budget
  • How to Guarantee a Social Security Disability Claim
  • Grandfather Says: Croc Hunting in Mindanao
  • How to Save Money on Dental Care So You Won’t Go Broke at the Dentist
  • 7 Big Reasons Why a Roth IRA Isn’t the Best Way to Save for Retirement
  • 3 Ways That Great Sleep Helps You Get Richer
  • Series I Savings Bonds Are Now Paying 9.62%; Here Are Their Pros and Cons
  • Black Coffee: Are You Not Entertained?
  • 100 Words On: What You Should Always Do Before Buying Stuff Online

Disclaimer

This site is for informational and entertainment purposes only, and the content herein should not be mistaken for professional financial advice. In fact, making investment decisions based on information published here, or any other website for that matter, is more than unwise; it is folly. This website accepts advertising in the form of monetary and other compensation; as such, topics of discussion are occasionally influenced by these advertisers. Sometimes, an article may also include affiliate links, meaning, at no additional cost to you, this blog earns a commission if you click through and make a purchase (for example, as an Amazon Associate I earn from qualifying purchases). Remember, you and you alone are responsible for the decisions you make in life, so please contact an independent financial professional for advice regarding your unique personal situation.

Sign up for the weekly Len Penzo dot Com newsletter
Len Penzo dot Com Delivered Weekly
Join more than 40,000 readers and fans who enjoy personal finance and macroeconomics with an offbeat twist!
Invalid email address
Thanks for subscribing!

Popular Now:

  1. 1. The Great Paper Towel Test: Which Brand Is Your Best Value?
  2. 2. How a Broken Washing Machine Fixed My Finances
  3. 3. Tip Inflation: We’ve Got Nobody to Blame But Ourselves
  4. 4. Lottery Fraud: Don’t Get Caught Paying “The Stupid Tax”
  5. 5. What’s the Fastest Way to Pay Down Your Mortgage Early?
  6. 6. The Marriage Conundrum: Joint or Separate Accounts?
  7. 7. Why Time Is More Valuable Than Money
  8. 8. 25 Examples of Shrinkflation That No Longer Fool Consumers
  9. 9. Historical Gold & Silver Benchmarks for Wages and Commodity Prices
  10. 10. 4 Good Reasons Why Some Quarters Are Painted Red

All-Time Most Popular:

  1. 1. 19 Things Your Suburban Millionaire Neighbor Won’t Tell You
  2. 2. Dear Friend: Here Are 41 Reasons Why I’m NOT Lending You the Money
  3. 3. Why Your Expensive Luxury Car Doesn’t Impress Smart People
  4. 4. If You Can’t Live on $40,000 Annually It’s Your Own Fault
  5. 5. 21 Reasons Why Corner Lots Are for Suckers
  6. 6. 4 Smart Reasons Why College Isn’t for Everyone
  7. 7. 18 Fast Facts About Social Security Numbers
  8. 8. My Ketchup Taste Test: Upset! Guess Which Brand Topped Heinz
  9. 9. Why I Prefer a Spreadsheet to Track Expenses and Manage My Finances
  10. 10. Here’s a Simple Trick for Getting Credit Card Interest Charges Waived

Copyright © 2022 Len Penzo dot Com · All Rights Reserved · Designed by Nuts and Bolts Media

© Len Penzo dot Com 2008–2022