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Mortgage Approval
Definition
Mortgage approval is a lender's decision to grant a home loan based on the borrower's creditworthiness, income, and property value.
Explanation
Mortgage approval has two stages: pre-approval (conditional, based on self-reported information) and final approval (after full documentation and property appraisal). Pre-approval gives homebuyers a clear budget and shows sellers you're a serious buyer.
Factors affecting approval: credit score, DTI, down payment, employment history, and property appraisal. Getting pre-approved before house hunting streamlines the buying process.
Example
With a 740 credit score, 20% down payment, and 28% housing DTI, a buyer is likely to qualify for favorable mortgage terms and rates.