What is a Loan Application?
What is a loan application? A loan application is a detailed form that lenders use to evaluate whether or not they can give you a loan and if so, the amount of money they will be able to lend you. Lender applications vary by company but on the application you may be asked to provide you bank account balances and account numbers as well as the bank’s branch address. They will also ask you information about where you work or what sources of income you have and your outstanding debts which includes loans and credit cards with names and addresses of creditors.
Once you have provided all the required information the lender will then pore over your financial situation based on that information and then suggest programs that most closely meet your needs. The lender may suggest steps you can take if your financial situation doesn’t measure up like cleaning up your credit, or paying down some of your monthly debt so you can get into mortgage-worthy shape. If this happens, bear in mind that not all lenders are alike and that some may be more willing to extend flexible programs to first-time home buyers while others may be more stringent with their criteria. For example, if you run into issues working directly with a bank, find a good mortgage broker because unlike banks these people have a knack for matching lenders with borrowers who need help getting their finances in order and have that person work on that preapproval for you. A preapproval letter is not a final loan commitment but it does show that you’ve taken steps to get the ball rolling on the financing before spending time on your house hunt. It also shows your financial strength and proves that you’re not just out there kicking the tires but that you have the wherewithal to follow through with a purchase. This information is important to owners since they do not want to accept an offer that is likely to fail because financing cannot be obtained. As the home buyer it also helps you to know exactly where you stand when it comes to how much you can pay for a home when you enter into a purchasing agreement.
As an investor-seller, I require a pre-approval letter be submitted with an offer. Sometimes they are worthless, but as you wrote, it shows that the buyer has at least put some effort into the buying process.
Comment by MRIGGS :: May 17, 2010