Pre-qualification: This is an informal estimate of how much you might be able to borrow. It's based on basic financial information you provide to a lender, such as your income, assets, and debts. Pre-qualification gives you a general idea of what price range you can consider when house hunting, but it's not a guarantee of a loan.

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Pre-approval: Pre-approval is a more formal process where a lender evaluates your financial information and credit history to determine how much they're willing to lend you. It involves submitting documentation such as pay stubs, bank statements, and tax returns. A pre-approval letter from a lender shows sellers that you're a serious buyer who is financially capable of purchasing a home.

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Application: When you're ready to move forward with buying a specific property, you fill out a mortgage application. This involves providing detailed financial information and documentation to the lender, who will then verify the information, assess your creditworthiness, and decide whether to approve you for a loan. If approved, you'll receive a loan commitment letter outlining the terms and conditions of the mortgage.

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Refinancing a mortgage refers to the process of replacing your existing mortgage with a new one, often to take advantage of better terms, such as lower interest rates, shorter loan duration, or changing from an adjustable-rate to a fixed-rate mortgage. Here's a breakdown: Lower Interest Rate: One common reason for refinancing is to secure a lower interest rate. If market interest rates have dropped since you took out your original mortgage, refinancing can allow you to reduce your monthly payments or pay off your loan faster. Shorter Loan Duration: Refinancing can also involve switching to a mortgage with a shorter term, such as going from a 30-year mortgage to a 15-year mortgage. While this may result in higher monthly payments, it can save you money in interest over the life of the loan and help you build equity faster. Cash-Out Refinance: With a cash-out refinance, you take out a new mortgage for more than you owe on your current loan and receive the difference in cash. This can be a way to access the equity you've built up in your home for things like home improvements, debt consolidation, or other expenses.

Is Refinancing worth it. »