A Colorado buyer's 'pre-qualification' for a mortgage differs from 'pre-approval' in that:
Why Pre-qualification is an informal estimate; pre-approval involves actual verification of income, assets, and credit Is Correct
Answer B: Pre-qualification is an informal estimate; pre-approval involves actual verification of income, assets, and credit
Exam Tip: Finance
Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.
Key Finance Terms in This Question
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Key Terms to Know
A lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Debt-to-Income Ratio (DTI)A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
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