Pre-Approved Versus Pre-Qualified For A Mortgage Loan
October 11th, 2007 Categories: Mortgage
Getting pre-approved versus pre-qualified
It is a common mistake for borrowers to think they are completely approved for the loan when they have talked to a loan officer over the phone or even in person. The loan officer may have given them different ideas on loan programs that are available and even given them a good faith estimate.
There is a big difference between being pre-qualified and being pre-approved. If you have only talked to a loan officer over the phone or in person and they have pulled credit but you have not given them any of your documents to support what you have told them such as pay stubs, W2’s, bank statements etc., chances are you are only pre-qualified and still need to go through underwriting.
Why is getting pre-approved so much better? A lot of times when I talk to a borrower over the phone they will tell me what they make but once I get the actual documents I find more income or less. This can change the entire approval and how much of a home you can afford.
By going through the process of getting your documents to the lender and then getting a full underwriting decision, once you have found a home you will basically get the appraisal, insurance and title and close. If you haven’t gone through the steps of gathering your documents, this can hold up the loan and your closing.
Many of the agents I work with will not even start showing houses until the buyer has been pre-approved by a loan officer and have gone through the underwriting process. The underwriter is someone that works directly for the source of the money and approves the loans. By getting pre-approved means you have given them all the information needed and required to document all that is stated. If these items have actually been verified the closing can happen very quickly and without issues.
A sample letter that I will give for a pre-qualification only is as follows:
To Whom It May Concern:
In regards to Joe borrower and their Mortgage Loan Pre-qualification; we are pleased to inform you that they have been pre-qualified based on our review of their credit.
Full underwriting approval will be contingent to an acceptable appraisal, title, insurance, liabilities, Income and assets. This file may also be subject to additional conditions/information needed by the Lender/Underwriter, upon receipt of the required documentation.
Versus a pre-approval letter:
To Whom It May Concern:
In regards to Joe borrower and their Mortgage Loan Pre-approval; we are pleased to inform you that they have been pre-approved based on our review of their credit, income and assets.
This approval is subject to receipt of purchase contract, acceptable appraisal and title, insurance.
Getting pre-qualified is a good first step; Take the next step and get your information to your loan officer so you can make sure you are set and when you find that great home.
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Thanks Cindee, Plus sellers like to know that you are an approved buyer, this takes some of the mystery out of it. Also it can help you in the negotiations too, a strong agent with an approved buyer can get a really good deal in today’s real estate climate.
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