Mortgage Home Loans: Implications of Prequalification, Privacy

May 11, 2012   Written by Administrator

Towards the end of 2011, Alfred, a 35-year-old software developer in Arizona, was looking for mortgage home loans so that he could buy a home for his family. He checked up on the prevailing trends of mortgage rates from a graph similar to the one below, to check for mortgage rates from 2005 through 2011 to begin with!

What he found was that the rates were the lowest in 2011, and still falling in 2012, as compared to the past several years. Low enough for Alfred to be able to easily pay back his mortgage home loan if he opted for a refinance on his current mortgage rate! The next logical step was for him to search for the most suitable mortgage loan lenders and shortlist one. For this, he not only did his initial research thoroughly, but he called up the shortlisted lenders and spoke directly to their representative to get all his questions answered. With the speed at which things move these days, within a couple of hours, Alfred received a message on his smart phone, saying that he had pre-qualified for the loan. Now the question was, did he get the loan for the amount that he really needed and should be opt for a pre approval rather than ensuring the availability of a loan?

Mortgage Home Loans: The Truth behind Prequalification

What Alfred had received, in fact, was nothing but a prequalification notification, which in no way proves that he is entitled to the mortgage home loan he requires. At best, it represents a rough estimation of his borrowing ability and is subject to several conditions, such as employment verification, thorough credit checks, and much more! So, how does prequalification differ from pre approval? Well basically, the major differences lie in usage and applicability of documentations and verifications. Quite often, the difference between a pre-approval and pre qualification is simply that the latter is issued without any kind of information verifications, while the former would actually begin with the buyer providing all documents as proof of information provided. However, it should also be noted here that neither of these would be considered as mortgage commitments or a written guarantee for obtaining a mortgage loan. However, landing a pre approval letter is any day a better bet than a mortgage prequalification document, when it comes to improving your chances of getting mortgage home loans.

Mortgage Home Loans: What about Privacy?

Often, borrowers like Alfred end up forgetting about the privacy concerns in a bid to get the mortgage loans quickly and at the best possible rates. Most of us don’t know that some or all the 26 types of information divulged in a mortgage application is in turn reported to the regulators, and actually made public. Some of these key data points include annual income of applicants, their sex, race, ethnicity, the location of the property in question, the amount that is being proposed for the loan, information on the loan application, and the status of the application with respect to approval or disapproval. According to the Consumer Protection Act and the Wall Street Reforms that were underway in 2010, the age of the borrower as well as his specific credit score also need to be collected. Naturally, if loans are to be approved via online mortgage loan lenders or otherwise, privacy is one of the key aspects to consider. Opting for a mortgage loan requires an in depth analysis of facts. Knowing more about pre approval, pre qualification and privacy norms can certainly help applicants like Alfred remove any obstacles that might come in their way.