Home Buying in Mountain View>Question Details

Tmd, Other/Just Looking in Sunnyvale, CA

I now know pre-qualified and pre-approved are very much different. However is an automated approval and a pre-approval the same?

Asked by Tmd, Sunnyvale, CA Sun Aug 7, 2011

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Tmd,

I love to see buyer's conditional commitment which is more accurate. Based on risk management, I always think about one step toward.

Andy
0 votes Thank Flag Link Thu Sep 1, 2011
Q: However is an automated approval and a pre-approval the same?
A: It can be - depending on how complicated your situation is and how certain the loan officer is of your situation actually being approved. The pre-approval will likely be an actual letter format though (i.e. "Congratulations you have been pre-approved for a sales price up to $500,000 with a conventional loan" etc. type thing), rather than just the "automated underwriting findings".

Usually the process will go:

1. Meet with a loan officer (this can be face to face or over the phone, I do not recommend solely done via email)
2. Loan officer will explain the process to the homebuyer, what will be done at each milestone, when out of pocket costs should be expected
3. Loan officer and homebuyer will verbally discuss the homebuyers situation, including financials, credit and any special circumstances the homebuyer is in (like getting gift funds, starting a new job in a new area, past employment, etc.)
4. You will complete a loan application (this is recommended to do with the loan officer "live", not just simply filling out the application and sending it to the loan officer) and credit is checked
5. You will provide loan officer documents the loan officer needs (paycheck stubs, W-2's, tax returns, bank statements, letters of explanation)
6. Loan officer reviews documents and contacts employers for any further required verification (for example averaging overtime, commissions, etc. and clarifying start dates if employment has been less than 2 years), including running the loan through the *automated underwriting system* (be it FHA, VA or conventional). If the loan is "borderline", or if there is any uncertainty, then the loan officer should contact underwriting to get clarification on how any unique aspects of the loan will be handled, and may even go so far as to send the entire loan file to underwriting to have a conditional underwriting approval issued for a "TBD" property address.
7. Loan officer issues a pre-approval letter letting the homebuyer know they are pre-approved for a certain amount

Someone with very simple situation, for example someone at their W-2'd job for 3 years, makes only salary (or is only using salary to qualify), down payment is coming from their own funds, credit is good to excellent, debt to income ratio is 43% or below, then that person likely would just need an automated underwriting approval in order for the loan officer to feel comfortable issuing a pre-approval letter, and the extra step of an underwriter reviewing wouldn't be a necessity.

Someone who has been with 3 employers over the past 2 years, has a self-employed side-job, down payment is being gifted by a cousin, and credit score is hovering around 640 with several unpaid collections & charge-offs... I would highly implore that person to make sure their situation has been reviewed by an underwriter before making an offer/accepting their loan officer's pre-approval letter.

Shane Milne | Loan Officer in Orange County, CA | NMLS #81195
Direct local #'s: 949-273-4161 or 646-257-4842
Lending in all 50 states, all types of mortgages
0 votes Thank Flag Link Tue Aug 9, 2011
Tmd,
A DU (desktop underwriting) is when your mortgage application is run through the underwriting program. It gives a list of conditions that must be met-W2s showing the same amount you put down on the application. A preapproval is only a preapproval if an underwriter goes over your mortgage application and proof of figures (W2s, paystubs, bank account statements and credit report). A loan officer can only due a prequalification, they are not an underwriter.
0 votes Thank Flag Link Mon Aug 8, 2011
Hi TMD,

I believe you mean DU automated approval and pre-approved. Pre-approval is still just a quick look at a credit package and documentation by a loan officer. DU automated approval is when your information is actually ran through the system and you computer matches your information with the banks criteria for a home loan and actually approve you for the loan (baring any conditions they may have). Contact a loan rep. in your area for further information or I can send you a referral. Good Luck!
Web Reference: http://www.ajsocalteam.com
0 votes Thank Flag Link Sun Aug 7, 2011
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