A mortgage approval process comprises of a few stages. A brief review of these is given below.

Pre – Qualification

A pre-qualification is the first stage of the process. A mortgage agent will go through your income, expenses and debts, and will you give you an estimate of your affordability and the total amount you can borrow. In other words, this is the maximum amount that you can borrow from the lender. Applications above this amount will probably cease to be advantageous and become a burden in the long run.

The affordability can be calculated from the debt ratio. You can use this information to calculate the maximum value you can spend on purchasing a house, and determine your monthly payments from it.

When you acquire the pre-qualification, a rate hold for a month to four months will be given to you. This means that you will be protected from rate increases. Since getting a pre-qualification is free, you should go through it.

Pre Approval

You should know that the lender has not even given a glance at your application at the pre-qualification stage. This happens in the pre-approval stage. The lender goes through your application and commits to providing you the loan at a certain mortgage rate. However, he will do this when he has seen your credit report and other relevant documents.

You will be given an approval certificate and a rate hold which will be valid for approximately four months. This still does not mean that you will be granted a loan, because the approval process requires many other conditions for which you must qualify.

Approval

The approval stage is somewhat similar to the pre-approval stage. You will have to give complete details about the house you will buy such as the address, purchase price and taxes. You will even have to specify the upfront amount which you can pay. This is not done in the pre-approval stage.

When the lender has all the required details, he will give you an approval if he is satisfied. The approval will then specify all the details and conditions such as the rate, monthly payments, and payment schedule.

Deal

If you agree to the terms outlined in the approval, the deal can be finalized. If you do not, the lender will see the adjustments he can make.  Once both parties are satisfied with the contract, it will be signed and you will receive the loan amount.