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Mortgage 101: The Difference Between Pre-Qualification and Preliminary Approval

By Tim Wilson, Chief Executive Officer, President, Prosperity Home Mortgage.

Depending on your market, multiple home offers are becoming more common. That’s why it’s important for you to be armed with all of the necessary tools before you find your dream home. Getting a letter from your mortgage lender before you start looking for your home is a great way to get an advantage over others in the bidding process. But with lenders offering both pre-qualification and pre-approvals, it can be tough to figure out exactly what you need. Understanding the difference between the two can be crucial to getting the home you want.

What is a lender pre-qualification?

This is the first step to getting a mortgage. In this process, the lender will ask you a few questions about your overall financial picture, including your debt, income and assets. After evaluating the information, the lender will provide an estimated mortgage amount based on the unverified information provided. This will give you an idea of how much home you can afford as you start your hunt. It’s important to realize that since this is based on unverified information and does not include a credit report, it does not carry the same weight as a mortgage preliminary approval.

What is a lender preliminary approval?

The next and more detailed step in the mortgage process is generally a preliminary approval. In this step, you’ll complete a mortgage application and provide the lender with all of the necessary documentation to evaluate your current financial picture. The lender will also check your credit rating. A preliminary approval estimates how much you may be able to borrow based on your verified income, assets and credit report scores. Having a preliminary approval letter makes you more competitive against other bidders but also increases the chance that the lender who offered the preliminary approval will provide your financing.

Are there other options?

Yes, depending on your lender, there may be a variety of additional options. With the FM Lending Services Buyer Advantage Program, for example, you can complete much of the financing process (and qualified borrowers may receive a commitment letter) before you even begin searching for a home. Having that commitment letter along with your purchase offer can help further strengthen your position.

The bottom line is that when it comes to buying your dream home, having as much ready upfront as possible is key to putting in a successful purchase offer. Doing your research and securing a preliminary approval is the best way to make sure that your offer is accepted when the time comes, and you get to move into the perfect home for you.

 

 

Reprinted with permission from the Long & Foster Companies, Inc. Newsroom blog.

A preliminary approval is based on our preliminary review of credit information only and is not a commitment to lend. We will be able to offer a loan commitment upon verification of application information, satisfying all underwriting requirements and conditions, and providing an acceptable property, appraisal, and title report. Preliminary approvals are subject to change or cancellation if a requested loan no longer meets applicable regulatory requirements. Preliminary approvals are not available on all products. See a mortgage consultant for details.

FM Lending Services Buyer Advantage is not a final loan approval. A Commitment Letter is based on information and documentation provided by you and a review of your credit report. The interest rate and type of mortgage used to approve you for a specified loan amount is subject to change, which may also change the terms of approval. The interest rate cannot be locked until your offer to purchase a property has been accepted. If the interest rate used for credit approval has changed, you may need to re-qualify. Information provided by you is subject to review and all other loan conditions must be met. After you have chosen a home and your offer has been accepted, final loan approval will be contingent upon obtaining an acceptable appraisal and title commitment. Additional documentation may be required.

All first mortgage products are provided by Prosperity Home Mortgage, LLC dba FM Lending Services. (877) 275-1762. Prosperity Home Mortgage, LLC products may not be available in all areas. Not all borrowers will qualify. Licensed by the NJ Department of Banking and Insurance. Licensed by the Delaware State Bank Commissioner. Also licensed in District of Columbia, Georgia, Maryland, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia.

NMLS ID #75164 (NMLS Consumer Access at http://www.nmlsconsumeraccess.org/)

©2017 Prosperity Home Mortgage, LLC dba FM Lending Services. All Rights Reserved.


As interest rates have risen in recent weeks, much attention has been paid to the effect rising rates may have on the housing market.  While interest rates do play an important role in your monthly mortgage payment, they are not the only factor to consider.

If you’re planning to purchase a home this year, be sure to understand each of the components that make up a mortgage payment, which can help you determine a monthly payment with which you are comfortable.  Here are the parts of a mortgage payment:

Principal: The principal part of your monthly payment pays off the loan amount you initially borrowed to buy your home.

Interest: In return for providing the funds you need to buy a home, lenders charge monthly interest on the principal balance you owe.

Taxes: Property taxes may be collected by your lender on a monthly basis and held in an escrow account to be paid on your behalf as they come due. The good news is: property taxes are usually fully deductible at income tax time. Consult a tax advisor for details.

Homeowners Insurance: Homeowners insurance provides financial protection in the event of losses that are the result of fire, wind, natural disasters or other hazards. Most mortgage lenders require you to have a homeowners insurance policy and may also be collect these funds to hold in an escrow account to pay your insurance company.

Mortgage Insurance: Mortgage insurance protects the lender against financial loss if a customer fails to repay the loan.

  • FHA-insured loans require a mortgage insurance premium (MIP)
  • VA loans may require a funding fee
  • Conventional loans can be insured with private mortgage insurance (PMI)

If mortgage insurance is applicable to your loan, that part of your payment is forwarded to the agency providing the insurance.

If you have questions, our mortgage consultants are always available to help you understand the home loan process!  Please also check out our on-line resources such as our mortgage payment calculator or the basics of buying!

 

 

 

This table is only to be used as a guide and does not include all loan types or loan features. Not all loan types are available to all borrowers. Borrowers will be subject to qualification and must satisfy all underwriting requirements and conditions. Not all borrowers will qualify. Speak with your mortgage consultant and carefully consider each of your home financing options so you can determine the home loan that is right for you.

All first mortgage products are provided by Prosperity Home Mortgage, LLC dba FM Lending Services. (877) 275-1762. Prosperity Home Mortgage, LLC products may not be available in all areas. Not all borrowers will qualify. Licensed by the NJ Department of Banking and Insurance. Licensed by the Delaware State Bank Commissioner. Also licensed in District of Columbia, Georgia, Maryland, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia.

NMLS ID #75164 (NMLS Consumer Access at http://www.nmlsconsumeraccess.org/)

©2017 Prosperity Home Mortgage, LLC dba FM Lending Services. All Rights Reserved.


Financing Your Home: Knowing Your Options Will Save You Money

By Tim Wilson, Chief Executive Officer, President, Prosperity Home Mortgage.

 

It’s a great time to buy a home. Interest rates for mortgages remain near historic lows allowing you to buy more for your money. If you’re currently a renter who has been trying to save for a home down payment, you’ll be happy to hear about these down payment options that can put you on the path to homeownership in no time.

What are the options?

Unlike typical 20 percent down payment loans, there are mortgage programs that offer affordable no and low down payment options. Please note we have listed only a few of the programs available. Not all of these programs may be available to you or in your area and certain restrictions may apply, including loan and lender requirements that vary by program.

No down payment

The Veteran’s Administration (VA) offers zero down payment loans for veterans and active duty military members. With a VA loan, you’ll often pay a funding fee that can be financed with the home loan or paid at closing.

The USDA program also offers no down payment options, which help make homeownership more affordable for low and moderate income families in certain designated rural areas in each state. There are also income limits based on your area’s average median income and number of people living in your household.

Down payments as low as 3 percent (conventional loans)

Conventional loans are offered through Fannie Mae and Freddie Mac with a down payment as low as 3 percent. These programs, though, require private mortgage insurance (PMI), which will increase your monthly housing costs. PMI rates vary depending on the size of your down payment and your credit score. But once you have at least 20 percent in home equity, your PMI payments can be eliminated.

For borrowers who want to avoid paying PMI, there’s another option: get two loans and contribute a down payment of 5 or 10 percent. For example, with an 80/10/10 loan where the first mortgage covers 80 percent of the home’s value, a second loan accounts for 10 percent and the remaining 10 percent is the down payment. Similarly, many lenders also offer 80/15/5 loans, enabling borrowers to make a 5 percent down payment.

Down payments starting at 3.5 percent (FHA loans)

Through the Federal Housing Administration (FHA), loans are available with down payments starting at 3.5 percent, but FHA loans require both an upfront fee and annual mortgage insurance premium (MIP) paid with your monthly mortgage. Unlike PMI payments, you’ll pay the MIP for the entire loan term.

Are there other ways to save for my down payment?

Down payment assistance programs also may be available from state or local housing finance agencies. On average, buyers receive from $5,000 to $20,000 in assistance, depending on the program and state of residence. Ask your local mortgage consultant about down payment assistance programs available in your area.

How much does this reduce my costs?

The savings with a lower down payment loan are substantial: To purchase a $300,000 home, you would need $60,000 for a 20 percent down payment. Switching to a 3.5 percent down payment requires $10,500: $49,500 less than for a 20 percent down payment loan.

As you can see, there are many options, but also many variables. Everyone’s situation is different. A qualified mortgage consultant at FM Lending Services can help you through the process of finding the right loan for your needs.

 

 

Reprinted with permission from the Long & Foster Companies, Inc. Newsroom blog.

Note: Low down payment options may not be the best option for all borrowers. Consult your mortgage consultant to review potential loan scenarios and financing options to determine the home loan that is right for you. All products listed are for primary residence financing only.

All first mortgage products are provided by Prosperity Home Mortgage, LLC dba FM Lending Services. (877) 275-1762. Prosperity Home Mortgage, LLC products may not be available in all areas. Not all borrowers will qualify. Licensed by the NJ Department of Banking and Insurance.  Licensed by the Delaware State Bank Commissioner.  Also licensed in District of Columbia, Georgia, Maryland, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia.

NMLS ID #75164 (NMLS Consumer Access at http://www.nmlsconsumeraccess.org/)

©2016 Prosperity Home Mortgage, LLC dba FM Lending Services. All Rights Reserved.


If you’ve recently started house hunting, you may have found that the home buying journey can be lengthy. Finding a place with the right combination of must-haves and nice-to-haves can be complex and time consuming.  How much square footage do you need?  Do you want to be close to parks, shopping, or services?  Will your commute to work be acceptable?

These types of questions are important, but they can be overshadowed by the possibility of rising mortgage rates as you apply for a home loan.  While interest rates should not be the only concern when obtaining home financing, your rate does have an impact on the loan amount for which you can be approved.  Quite simply, the lower your interest rate, the more buying power you have.

Interest rates have risen in recent weeks, but we still want our clients to be able enjoy an exciting path toward homeownership, not one filled with anxiety about changing interest rates.  That’s why you may be interested to learn about the FM Lending Services Buyer Advantage: Lock, Shop & Home loan program, which offers buyers an opportunity to counter the worry of rising interest rates.

The FM Lending Services Buyer Advantage1 allows you to get much of the home financing process out of the way and obtain a Commitment Letter, which can help set your purchase offer apart from other offers a seller may be considering.  Participating in the FM Lending Services Buyer Advantage costs you nothing additional and can help prevent last-minute issues with your home financing, so you can enjoy an on-time loan closing.

What’s more, Lock, Shop & Home allows you to lock in an interest rate for up to 90 days at TODAY’S rate instead of waiting to lock in a rate only after you’ve found a home to purchase.  Here are a few highlights:

  • No property address is needed at the time of application and rate lock.
  • Lock an interest rate up to 90 days.2
  • Conforming and high balance loan amounts are available.
  • May be used with conventional or government fixed rate loan programs.3

Want to learn more about the FM Lending Services Buyer Advantage: Lock, Shop & Home loan program and see if it's the right fit for you? Contact a mortgage consultant near you!

 

 

 

1. FM Lending Services Buyer Advantage is not a loan approval. Ask your mortgage consultant for details about FM Lending Services Buyer Advantage. A Commitment Letter is based on information and documentation provided by you and a review of your credit report. The interest rate and type of mortgage used to approve you for a specified loan amount is subject to change, which may also change the terms of approval. If the interest rate used for credit approval has changed, you may need to re-qualify. Information provided by you is subject to review and all other loan conditions must be met. After you have chosen a home and your offer has been accepted, final loan approval will be contingent upon obtaining an acceptable appraisal and title commitment.  Additional documentation may be required.

2. Additional fees may apply.

3. Lock, Shop & Home program is not available for bond, jumbo, or renovation loan programs.

All first mortgage products are provided by Prosperity Home Mortgage, LLC dba FM Lending Services. (877) 275-1762. Prosperity Home Mortgage, LLC products may not be available in all areas. Not all borrowers will qualify. Licensed by the NJ Department of Banking and Insurance.  Licensed by the Delaware State Bank Commissioner.  Also licensed in District of Columbia, Georgia, Maryland, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia.

NMLS ID #75164 (NMLS Consumer Access at http://www.nmlsconsumeraccess.org/)

©2016 Prosperity Home Mortgage, LLC. All Rights Reserved dba FM Lending Services.


Should You Rent or Buy?

Oct 13
2:42
PM
Category | FM Lending News

With interest rates near historic lows, opportunity is knocking for first-time home buyers.

We understand the option to rent or buy a home depends on your unique situation, and your decision requires careful consideration.  While renting may make more sense for some, buying a home can be less expensive on average than renting long-term.¹

When deciding which option is right for you, we recommend asking some basic questions:

  • Is it important that your home can be used as an investment?
  • How long do you plan to stay in your home?
  • How fast do rent and home prices rise in your area?

Buying may be the right option if you:

  • Want the opportunity to build equity in your home as a long-term investment and take advantage of homeowner tax credits and incentives.
  • Are planning to stay in your home long-term (typically 4 years or more).
  • Would like to create a home that is unique to your own style.
  • Are experiencing rising rent payments.

Renting may be the right option if you:

  • Prefer a monthly budget that does not include costs for home maintenance or improvements.
  • Plan to move again within the next few years (typically less than 4 years)
  • Enjoy the amenities that are often available within rental communities.
  • Have financial obstacles or credit issues that may preclude homeownership.

 

Buying or renting can be different for everyone based on your individual situation.  Contact a local mortgage consultant to answer any questions you may have about buying a home!

 

BY THE NUMBERS:
Rent vs. Buy calculations often differ by real estate market. Use our rent vs. buy calculator tool to help you decide if renting or buying is right for you!

 

 

 

1. Contact a mortgage consultant to compare the cost of renting versus buying to determine the right option for you.
All first mortgage products are provided by Prosperity Home Mortgage, LLC dba FM Lending Services. (877) 275-1762. Prosperity Home Mortgage, LLC products may not be available in all areas. Licensed by the NJ Department of Banking and Insurance. Licensed by the Delaware State Bank Commissioner. Also licensed in District of Columbia, Georgia, Maryland, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and West Virginia.
NMLS ID #75164 (NMLS Consumer Access at http://www.nmlsconsumeraccess.org/)
©2016 Prosperity Home Mortgage, LLC dba FM Lending Services. All Rights Reserved.


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