InvestorDictionary.com
HomeDictionaryCategoriesBooks
Search for Terms:  
Browse by Category:  
Browse:  A  B  C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X  Y  Z  # 

Pre-qualification

What's the definition?

Pre-qualification is a term of art in retail finance, and means that a loan officer has taken some information from the borrower, and made a tentative decision, but not verified any of it.

 

With a pre-qualification, the borrower typically has not stated their social security number or other identifiers, so it is not possible to check credit. A borrower will give their employment, income and asset information and the amount of current monthly debt. In addition a borrower is asked about their general credit worthiness.

 

Based on this quick work up the borrower will be told that they pre-qualify for a certain loan amount. For example, if the borrower makes $15/h or $2600/month this is then calculated to an industry-standard ratio of debt to income, for example 36%. So if a borrower makes $2600/month they would be pre-qualified at a total debt of $936 (this includes any monthly payments, including car & credit card min. amount; along with the proposed payment of principal, interest, taxes and insurance)

 






The infomation above is licensed under the GNU Free Documentation License and is derived from The Free Encyclopedia.com
Pre-approval


Browse:  A  B  C  D  E  F  G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W  X  Y  Z  # 
The Financial Ad Trader
Copyright © 2008 InvestorDictionary.com - All rights reserved.