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Terms and Lingo

Pre-Approved versus Pre-Qualified

When it comes to home financing, your first move can easily determine how the rest of the process goes. You have two choices – get pre-qualified for a mortgage or get pre-approved.

Getting pre-qualified means a lender has given you an estimated mortgage amount based on a general discussion about your finances and maybe a credit pull.

Getting pre-approved means you have a written pre-approval from a lender for a specific mortgage amount based on a detailed financial analysis and credit check; it’s basically a complete verification of the same information that is only discussed in pre-qualification; there is more about this below.  Going this route, ensures that there are no potential red flags that could derail your loan later in the process.  More people are choosing pre-approval as their first step because it offers three potential benefits:

Saves Time

Getting pre-approved means you have a clear budget and price range. Shopping online, meeting with a realtor, and negotiating with the seller will be easier and faster.

Saves Money

During negotiations, the seller may give you a better price knowing that you have a definite source of funds.

Better Chance of Getting the Home

Let’s say the seller has multiple offers on a home. If you’re pre-approved while the other buyers are only pre-qualified (or less), the seller is must more likely to choose your offer.

The message is simple – a bigger commitment in the beginning can lead to a bigger benefit in the end. Let Envoy Mortgage help you take the first step to the Wisconsin home of your dreams, contact me or read about the ways to prepare for your pre-approval appointment here.

Odd Days’ Interest

Also known as “per diem” interest. This is money that is collected (sometimes refunded when rescission periods are involved) from a borrower at closing to synchronize their closing day with the loan payment due dates. This is required because interest accrues daily, if it wasn’t done, your first payment would be different than your normal payment amount.

Example: If you closed on the purchase of your new home on 8/15, the lender would collect 17 days of interest at closing (31 days in the month; interest is paid for every day that you have the loan; the only days where interest is not collected is the first 14 days of the month; 31-14=17). This closing date would, in turn, make your first payment (due 10/1) equal to all other payments (on a fixed note) because it was equalized.

Why would the first payment be due 10/1? Great question! Mortgage interest accrues in arrears; this means that when you make your first payment on 10/1, you are paying the uncollected interest for the month of September in the example above.