Kelly, Other/Just Looking in San Francisco Bay Area

Is there really a big difference between being pre-approved and pre-qualified for a loan?

Asked by Kelly, San Francisco Bay Area Wed Jan 23, 2008

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3
Alan May, Agent, Evanston, IL
Wed Jan 23, 2008
You betcha...

PreQualification is often based on a simple conversation with a loan officer... "If all of the financial information that you've told me is correct (income, assets, revolving credit, debt) then you'll be "qualified" for $XXX,XXX.00 in loan @ X% interest for 30 year fixed.

PreApproval is usually the same as the above PLUS, they've actually verified employment, verified assets, debts, confirmed credit... etc...

Mortgage Commitment will be achieved when they've sent all of that to underwriting, and underwriting has approved the file, and is prepared to fund!
2 votes
Phil Fowler, Agent, Brandon, FL
Wed Jan 23, 2008
Hi Kelly,
Just to add to the previous comment, many sellers require the pre-approval letter when you are making the offer. The reason being, they do not want to take the risk of tying up the property with someone who can not afford it.

Bottom line, you don't want to be looking at homes which you really can't afford.
Web Reference:  http://www.PhilFowler.com
1 vote
Pete Sabine, Agent, Martinez, CA
Wed Jan 23, 2008
There is a huge difference in a loan pre-qualification letter and a complete loan pre-approval.
Loan pre-qualification is nothing more than taking a loan application, checking a buyer’s credit report and debt-to-income ratios to match loan program qualifying criteria.
A loan pre-approval is achieved when the buyer’s complete loan package with all required supporting documentation is submitted to a bank underwriter for conditional approval. The conditional approval may only require a satisfactory property appraisal and acceptable title report and insurance to complete the loan processing.

Tip-
“Pre-approval” is a misused term and often overstated by Realtors and mortgage brokers. A true loan pre-approval will have an expiration date and a list of any remaining funding conditions yet to be satisfied.
1 vote
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