More Banks Shun Mortgage Preapprovals

More Banks Shun Mortgage Preapprovals

Some lenders are opting to do away with mortgage pre-approvals, according to a recent MarketWatch article.

A mortgage pre-approval is a lender’s commitment in writing that states the maximum loan a homebuyer can obtain and the possible interest rate. This helps buyers by giving them a guideline for staying within their budget when conducting a house search.

However, a recent study by the Federal Financial Institutions Examinations Council might indicate that lenders are moving away from providing pre-approvals. Only about 29,912 pre-approvals given by the top 25 mortgage lenders yielded mortgages offered to borrowers for a home purchase in 2012. This is a decline from 101,626 in 2007. Furthermore, pre-approvals made up just 4% of purchase mortgages that came from these lenders last year. This is down from 9% in 2007.