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Ratehold or Pre-Approval? What is the difference?
October 18, 2021 | Posted by: Julie Stewart-Boyle
Ratehold may be a term that you are not familiar with, yet is one that all prospective buyers should know about. A ratehold is offered by lenders to clients who are purchasing a new home and need a mortgage. The purpose of the ratehold is to secure the interest rate on your mortgage application for a certain time period. Often, these holds range from 90-120 days. These are only available to buyers looking to purchase a home (not for refinances)
When you’re house hunting, it’s a great idea to know the amount of mortgage you qualify for, your monthly payments, and that your interest rate will be held for a specified period of time. This way you can shop within your price range, you don’t have to worry about rates rising, and both realtors and sellers will know you’re serious.
Once you have created an application with me and have sent all relevant documents, I can submit it to the appropriate lender who is offering a ratehold on an interest rate you want to take advantage of – all without a property attached. Comforting for First Time Home Buyers!
Keep in mind that a pre-approval is not a mortgage approval, it is simply just a ratehold. They are the same thing. Lenders will only review your documents, when they receive an application on a specific property and accepted offer to purchase (a “real” deal), but you will have the advantage of that low rate held for you
This is how a rate hold works: I submit your application to a lender for a fixed interest rate of 2.19% for five-years. On day 60, that interest rate moves to 3.12%. As long as your mortgage closes in the next 60 days, you are protected and can keep your lower rate of 2.19%. Plus, if rates happen to trend downward, you can also take advantage of the lower interest rate.
This ratehold does not commit you to working with that particular lending institution, nor does it commit you to working with me. It also does not hurt your chances of receiving an approval down the road! All it does is protect the interest rate for you while you shop the market, so you don’t have to worry about it increasing while you are hunting for your perfect home
Be sure to not make significant changes after getting the pre-approval i.e., changing jobs, adding debt or missing payments, co-signing another loan, or using your down payment money. These actions will change the mortgage amount you qualified for
Once the 120 days expires, if you have not found that perfect home or want to take advantage of different interest rates, there is nothing stopping us from submitting another ratehold! It will just be subject to the current rates on the day of submission
If you are looking to purchase a new or secondary home, please don’t hesitate to reach out to me to get started on the pre-approval process and put your ratehold in place!For all your mortgage related questions, contact Julie Stewart-Boyle, 250-668-4420, firstname.lastname@example.org.
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