Are there any differences between pre-qualify and pre-approve? How long will a pre-qualified or approval?

Asked by Mok, 60630 Fri Jun 26, 2009

letter valid for? Any application fee for each?

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12
Fred Griffin, , Tallahassee, FL
Sun Jun 28, 2009
Pre-Qualify is history.

Pre-Approval and POF (Proof of Funds) Letters are today.
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A suggestion, which may vary depending upon your State or locale,
and which may sound Obvious, but you would be surprised:


Do NOT show the Seller a Pre-Approval Letter that states a Higher Amount of Money
than the amount that you are Offering!

(Same for Proof of Funds, even if it means taking money out of an Account to get the amount Down).

For example, you may be Pre-Approved by your Lender for $300,000.
You look at a house listed at $300K, and you write an Offer for $275,000
Have your Lender put $275,000 on the Pre-Approval Letter, NOT $300K.

If that Seller counters your offer at a higher amount, then ask your Lender for a New Letter with the higher amount.
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Also, unless you have a signed Buyer Brokerage Representation Agreement where the
Real Estate Agent has total Confidentiality and Loyalty to you (Fiduciary),
then do NOT tell the Agent how high you can go.

Because a Seller's Agent, or even a Transaction Broker or Dual Agent (depending on the State),
may be obligated to tell the Seller that you are qualified for more money and can go higher.

(Yes, I know that many Real Estate Agents talk to the Lender you are dealing with,
and they already know how high you can go, because the Lender told them.
Again, be careful if that Agent or Broker may be obligated to tell the Seller how high you can go).


Best wishes,
Fred
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2 votes
Nike (Nikki)…, , Beverly, Chicago, IL
Mon Jun 29, 2009
Hi Mok,

The prequalification is inferior to the preapproval and I don't know too many Lenders that even use them any more, or too many Seller's Realtors that accept them.

Both options will usually let you know what loan programs you qualify for, how much property you can buy, what downpayment, rate and mothly payments you will have.
The preapproval goes a step further by assuring your seller that you have had you rpapers reviewed by an actual underwriter, and they have "approved" you subject to some conditions. A Seller will definitely lean towards a preapproved buyer before the prequalified one because in their opinion, the preapproved buyer is more likely to close.
Most Brokers do not charge application fees for either option and the letters are usually good for 120 days. If you are buying a new construction, the letter should be good for 180 days.
It is always best to talk to at least 3 Brokers / Lenders to get a good feel for who to use. Please ask as many questions as you need of them. This will let you know if they have a variety of programs or will just try to stuff you in a small box, and also to test their level of knowledge and competence in the program of your choice. Should the Loan officer hesitate or be unable to answer your questions, or display any level of frustration towards you, consider that a red flag, and move on to someone else.
Remember, the prequalification or preapproval will be only one step in your buying process, so please prepare yourself for the whole deal. You will need a good Realtor and an Attorney (find one that specializes in Real Estate). If you need more information, you could go to http://www.hud.gov and read more about the process.
Good luck in your buying process. I hope it all turns out well for you.
1 vote
Kurt Clements, Agent, Schaumburg, IL
Mon Jun 29, 2009
Mok:

A pre-qualification is when you speak with a mortgage lender over the phone and give them a verbal on your assets, income, etc. The lender would pull your credit and would "pre-qualify" you based upon your credit and phone conversation.

A pre-approval is basically confirmation of the conversation. The lender will verify your assets and income with bank statements, income tax returns, pay stubs, etc.

It takes about 1 hour to get a pre-qualification and as soon as you fax over your documents to your lender is as long as it would take to get a pre-approval. You need to get the pre-approval.

If you have any other questions, don't hesitate to contact me at 630-806-7016.00

Kurt Clements
Senior Vice President
GSF Mortgage
3933 75th St
Aurora, IL 60504

Office: 630.806.7016
Cell: 630.430.1091

kclements@gsf-mortgage.com
http://www.gsfgovernmentloans.com
1 vote
Fred Griffin, , Tallahassee, FL
Sun Jun 28, 2009
Thank You, Dunes
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*** Mok -

to see an example of a recent Pre-Approval Letter,

visit my web page http://www.zekerealestate.com/Financing.html

scroll down the page to see the SunTrust Pre-Approval Letter

(if the link does not work, go to zekerealestate dot com, click the Financing Link on the Left Side)

Best wishes,
Fred
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1 vote
Mok, Home Buyer, 60630
Fri Jul 3, 2009
Thank you all for yourvaluable information. It really helps!
0 votes
William Chu, Mortgage Broker Or Lender, Elmhurst, IL
Thu Jul 2, 2009
Mok, a preapproval results from your sharing information (credit, income and etc) with a mortgage broker/lender so he or she can provide a professional opinion of how much mortgage financing, what are the terms of financing and your monthly housing investment.

If you have your information (paystubs, W2s, tax returns if required and bank account statements) ready to share with a mortgage professional, you should be able to get your preapproval in less than 1 hour.

If you need help, feel free to reach out to me.
0 votes
Kurt Clements, Agent, Schaumburg, IL
Mon Jun 29, 2009
Mok:

Forgot to add they are good up to 120 days, and no application fee for either.

Kurt
0 votes
Voices Member, , Benton County, OR
Sun Jun 28, 2009
Fred, You give some great, helpful answers and this Forum benefits from your contributions IMHO.
0 votes
Karen Breen…, Agent, Chicago, IL
Sun Jun 28, 2009
Hi Mok,
As the mortgage/housing industry has radically changed, so has the preapproval process. We have moved from the "cloud a mirror - get a mortgage" environment to the fully verified pre approval world. It used to take a few hours to get a written pre approval, and now it takes several days to a week for the same. I don't know of any lenders that aren't looking for full documentation in order to issue a written pre approval. So before you start shopping in the Jefferson Park area, it would be a good idea to get started on the process. I have a list of 4-6 lenders that I have been working with for many years, and who have proven records in closing transactions (not so easy anymore!).
I have a written offer on one of my listings that we have been waiting a week for the pre approval. The owner will not sign the offer before we have a written pre approval since the mortgage guidelines have changed so radically since last October.
Please feel free to contact me for additional info or solid mortgage lender references. And be sure to use a local agent in your home search! They can give you accurate info on the market that they work in everyday!
Good luck!
0 votes
Jeffrey Kropp, Agent, Chicago, IL
Sat Jun 27, 2009
Prequalification is almost meaningless in today's market, since it is so easy to run credit and obtain a preapproval instead. More to the point, I have never even seen a prequalification letter while helping buyer clients over the last 8 years. A buyer needs a preapproval letter and can secure one quite easily without a fee. You never want to pay a fee because you may decide to actually send your loan to another lender once you are under contract (that is the time to shop rates- no sooner). Some lenders require all your documents before issuing a preapproval while others will just run credit, which would be fine as long as you are truthful on the application. Approvals from an underwriters standpoint are good for four months, after which your credit report must be run again. Even preapprovals are very preliminary, since the lender will need an appraisal after you buy a home and will want to know everything about the particular home (and condo association if applicable) before issuing what is called a loan committment. Generally, a real estate contract will provide for 30-45 days to secure a firm loan committment after you sign, to give the appraiser time to assess the home and the underwriter time to examine the file and ask for follow up documents (known as "conditions"). So a preapproval, though crucial, is really only an examination of your standing.

Hope this helps! Also a common misunderstanding is that different banks have different guidelines so you should "talk" to a bunch. With some limited exceptions, all lenders use the same computer underwriter to plug your file into so really you just need to talk to one for a preapproval.
Web Reference:  http://www.1sthomegroup.com
0 votes
Patrick Thies, Agent, Anytown, IL
Fri Jun 26, 2009
Hi Mok,

A pre-qualified letter is a preliminary letter that states based on the information you provided you are eligible for a loan of x amount of dollars. There is no cost for a pre-qualified letter. Most people will want a current letter if it is more than 60 days old. A pre-approval letter holds more weight than a pre-qual letter. A pre-approval is given when you have applied for a loan and started the loan process. Proof of income, tax returns, and credit checks have been done. There is a application fee for this. A pre-approval may still hold conditions for final approval. It's usually good for 30 to 60 days before it needs to be updated.
0 votes
Timothy Fitz…, , Joliet, IL
Fri Jun 26, 2009
Hey Mok,

pre-approval is more of an in depth search into you finances and is required by most before you can even submit a contract. Pre-qualification tis very preliminary and just scratches the surface of you financial situation. Basically a waste of time. None of the lenders I work with charge for pre-approving a client. They are usaully good for a month or two.

Tim
815-353-1901
tfitzgerald@c21proteam.com
0 votes
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