The majority of Lenders will guarantee clients an interest rate during their shopping around for a home (“rate commitment”).  This protects the consumer from interest rates hikes for the established time period set by the lending institution.  This feature is extremely important.  It saves the borrower money and also saves them from losing their chosen home if interest rates increase.  Interest rates increases sometimes decrease  reduce the amount of mortgage financing a borrower qualifies for, and could result in a larger down payment required.

If the rates one day before closing are lower than the committed rate, the lender will finance the mortgage transaction at the lower rate.  However, some lenders will commit to the lowest market rate during the commitment period.  When a lender commits to a rate, they usually require an applicant to be fully pre qualified. An INVIS Mortgage Consultant can pre qualify your with the right mortgage lender and insure your rate commitment meets your needs.

Pre qualification – The nuts and bolts.

When you are pre qualified it means that the lender has reviewed and verified the financial information from your application and has determined a maximum amount of financing you can afford.  The information required for a pre-qualification is almost as detailed as that required for a mortgage approval.  This differs from a rate commitment because a pre qualification requires the lender to complete the preliminary underwriting, whereas a rate commitment does not.

The benefits of being pre qualified are numerous, the more important of which include:

• shopping within your price range without having the concern or risk that major complications will arise in the final hour.
  
• you are  may be able to make a stronger purchase offer without "subject to financing" conditions. Therefore, your Realtor will be able to negotiate harder on your behalf and get you your home ahead of other competing offers.
  

The only thing left after a pre qualification is getting the lenders approval of the property, usually determined by an appraisal.  In summary the pre-qualification process has 5 steps:

1. Phase 1:  An initial pre qualification is given based on unverified gross income figures.

 
2. Phase 2:  A full pre qualification, yet unverified, is done based on information provided in the mortgage application.

 
3. Phase 3:  Verification of all financial information including income and employment, savings and equity, etc.

 
4. Phase 4:  Verification of credit worthiness.

 
5. Phase 5:  Lender approval of property through a property appraisal.

Pre Quantification

Pre quantification is part of the pre-qualification process.  It is simply a calculation of how much an applicant "may" qualify for given unverified gross income figures, and utilizing a Gross Debt Service Ratio (GDSR).  The calculation also takes into consideration expected expenses.  For example:

• Combined gross income of $72,000 ($5,000 per month).
  
• GDSR of 32% - this means you can spend and maximum of $1,600 per month on shelter, including the ancillary costs of owning a home – i.e. heat, maintenance, property tax …

Gross Income	$6,000
GDSR of 32%	$1,920
Property Taxes	$200
Other Ancillary Costs	$125
Maximum Mortgage Payment	$1,595

The lender then takes the amount calculated and comes up with the maximum amount of financing you would qualify for based on your income. This procedure is simply the reverse of calculating a mortgage payment given the payment amount, amortization and interest rate.

You can use our calculators to do these for you quickly and easily or get in touch with an INVIS Mortgage Consultant or call 1-866-844-6847.