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PREAPPROVAL
VS PREQUALIFICATION
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| What could be
more comforting than the peace of mind that goes with knowing
your mortgage is fully approved? |
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| You will have a
greatly improved negotiating position when you are preapproved
for a mortgage. Sellers are more apt to negotiate with
someone who already has a mortgage preapproved in hand. The
preapproval letters lets the seller know they are working with a
serious buyer. A preapproved buyer can also close on a property
more quickly--another consideration for a motivated seller.
Obtaining a preapproved mortgage is essential in a sellers'
market. |
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| Preapproval
uses basic information as well as electronic credit
reporting. It is a true mortgage commitment, which means a
commitment to financing your home and an indication of the total
mortgage amount available to you. Cendant Mortgage, as
well as other mortgage lenders, can help you through the
preapproval process. In most cases there is no charge for this
service. Ask your Sales Associate for more information. |
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| Prequalification,
on the other hand, is not a full mortgage approval, but an
estimate of what you can afford. When you prequalify for a
mortgage, the lender collects basic information regarding your
income, monthly debts, credit history and assets and then uses
this information to calculate an estimated mortgage amount.
Of the over 50 different
mortgage types available, the two largest categories are fixed
and adjustable rate mortgages, each with advantages to consider.
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Fixed
Rate Mortgage
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| The fixed rate
mortgage is a traditional way of financing a home. The interest
rates stays the same for the entire term of the loan--usually 15
or 30 years--so the interest and principal portions of your
monthly payment remain the same.
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Adjustable
Rate Mortgage (ARM)
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| The interest on
an adjustable rate mortgage is linked to a financial index, such
as a Treasury security, so your monthly payments can vary over
the life of the loan--usually 25 to 30 years. Most adjustable
rate mortgages have a lifetime cap on the interest rate increase
to protect the borrower.
The lower initial payments
on ARMs make it easier for buyers to qualify. Some ARMs may be
converted to fixed rate mortgages at specified times, usually
within the first five years.
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