"What's the difference between 'ELIGIBLE' and 'PREAPPROVED?"
ELIGIBLE:
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You meet basic criteria for a loan based on preliminary information provided (e.g., credit score, income, DTI ratio)
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It's often determined through a soft credit check or automated system through platforms like Fannie Mae’s DU or Freddie Mac’s LPA that says the application meets their guidelines.
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It does not mean you’re guaranteed a loan. It simply means you might qualify, pending documentation and further review.
PREAPPROVED
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It means a lender has reviewed your financial documents (pay stubs, W-2s, bank statements, credit report) and conditionally agrees to lend you up to a specific amount.
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Stronger than “eligible”: This is a more serious step and gives you a letter that sellers and agents often require in competitive housing markets.
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Still not final: It’s conditional—subject to the property appraisal and underwriting.
Ready to get started? Contact us to learn more
"WHAT ARE THE RISKS OF HOME EQUITY LINE OF CREDIT?"
While a Home Equity Line of Credit (HELOC) offers flexibility and relatively low interest rates, it’s not without its pitfalls. Here are some key risks to consider:
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Variable Interest Rates: Most HELOCs come with adjustable rates, which means your monthly payments can increase unexpectedly if market rates rise.
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Risk to Your Home: Since your house serves as collateral, failure to repay the loan could lead to foreclosure.
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Unpredictable Payments: Many HELOCs allow interest-only payments during the draw period, but once repayment begins, monthly costs can spike dramatically.
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Overspending Temptation: Easy access to funds might encourage unnecessary spending, leading to mounting debt.
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Reduced Equity Cushion: Borrowing against your home reduces the equity you’ve built, which could impact future financial flexibility or resale value.
If you’re considering a HELOC, it’s wise to weigh these risks against your financial goals and stability. Want to learn more, contact us to discover your options.