Lenders do not commit themselves to anything when they qualify a potential borrower.
Hence, there is nothing to hold them to.
Qualification (or "pre-qualification" as it is often called) is simply
an opinion by a lender (or someone else) that based on information you have
provided covering your income, assets, and debts, and given current market interest
rates, you qualify for a loan of some specified amount. If any of the information
you provide turns out to be different, or if interest rates increase, the opinion
is subject to revision.
You may be thinking of a "pre-approval", which is designed to make
it easier to shop for a house, and does involve a commitment by the lender to
make a loan prior to the identification of a specific property. On a pre-approval,
unlike a pre-qualification, the lender verifies the information you provide
and has checked your credit.
The lender's commitment under a pre-approval, however, probably will be expressed
in terms of a monthly mortgage payment rather than a loan amount. Since the
interest rate is not known at the time the pre-approval is granted, lenders
are reluctant to commit to a specific loan amount for fear that a rate increase
would increase the monthly mortgage payment to an unacceptable level relative
to the applicant's income. If this were to happen, the loan amount corresponding
to the approved monthly payment would drop, and the applicant would either have
to increase the down payment or buy a less costly house. This is why a pre-approval
has limited value.
To convert the monthly mortgage payment in a pre-approval into an approved
loan amount, the interest rate must be fixed. For this you need a rate lock
commitment from the lender, which will specify the rate, points, loan-to-value
ratio and other features of the transaction. A rate lock is not usually given
until you submit a complete application, and it may require paying a fee.
April 5, 1999
