What is the difference between Getting pre-qualified for a mortgage, pre-approved for a mortgage and final approval for a mortgage?

Asked by Patricia Ammerman GRI, ABR, Raleigh, NC Fri Oct 19, 2012

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Kalyn Ringwold’s answer
Kalyn Ringwo…, Agent, Cary, NC
Sun Oct 21, 2012
I'm sorry but I have to disagree with you Trevor. There is a difference. Essentially a pre-qual is like the letter a credit card lender sends you in the mail. They haven't run all of your information. They have done a quick checklist of things and you met their basic criteria, therefore making you pre-qualified and ready to receive the first offer. A pre-approval has taken a step above that. You have gathered the info and submitted the paperwork. A pre-approval is a better judge than a pre-qual that you will get the loan. If you type in google what is the difference a plethora of sites will pop up explaining what I just said. I attached one http://www.tidewaterhomefunding.com/questions.php.

Sometimes people aren't ready to get pre-approved. They are in the very beginning stages of thinking about if they would want to buy, and they are curious to know what they would possibly pre-qualify for. That's when the lenders who help out over the phone come in. I think they are doing a service to those people. Sometimes you want to be eased into something instead of feeling like your being hit with all these loan docs and you haven't even decided if you really want to buy a home.

If you do ever decide to buy I would love to be of assistance. Feel free to look at my website and my blog. They both have great info on it, and the website has a great home search tool.
http://www.RealEstateWonderWoman.com
1 vote
Trevor,
I have spoken with 3 other loan officers now and they all agree. When every officer, internet article, and person on here agrees on the same topic and only one person thinks different and that same one person is trying to make themselves look better than the others and sell their product... I'm sorry but I'm going to have to disagree with you. It seems in this case the loan officer may have mixed his facts. I am not trying to get into some internet war with you. But I can't agree with you either. If you want to discuss it further feel free to email me. kringwold@yahoo.com I can give you the information I have been given. Again when 3 other officers from 3 different places tell me something and I have a plethora of information to back it up from legitimate sites; Anyone would be a fool not to believe it. And why did you delete your comment just to repost it and make it number one again...
Flag Mon Oct 22, 2012
Kalyn,
Respectfully, please leave the "Loan Officering" to Loan Officers. I stand by my post as it is based on TRUE regulatory requirements, not incorrect junk posted on the internet by people who should know better.
Trevor Curran
NMLS #40140
Flag Sun Oct 21, 2012
, ,
Fri Oct 19, 2012
BEST ANSWER
Good afternoon Patti,

The ONLY difference between Prequalification and Preapproval is the spelling. The fact is, according to HUD Guidelines, we Lenders are not supposed to "Preapprove" anyone! It's just semantics and marketing hype.

I have seen many real estate agents here on Trulia and elsewhere write the difference is that we Loan Officers only run a credit report for Prequalification but we look at all the Income and Asset docs along with the credit report on the Preapproval. More nonsense hyped by BAD Loan Officers.

When you are starting out to become a homeowner you want to get Prequalfied by a Licensed Mortgage Loan Originator (MLO) with at least 15 years experience in the trade. You can verify the License of any MLO at http://www.nmlsconsumeraccess.org/

An experienced Mortgage Loan Originator (Loan Officer) will take the time to review Income, Assets and Credit documentation in detail with a prospective Borrower. As you begin your journey towards homeownership, you'll want to sit down with a Loan Officer who does that. Anyone who only runs a credit report and does a telephone interview about your income and assets without reviewing documents is wasting your time.

BECAUSE...

In the "Final Approval" for a mortgage loan:

1. You'll have identified a property to buy and signed a purchase agreement/contract of sale
2. You'll have made a formal Loan Application to your Lender for the loan
3. Your Lender verifies your Employment, Income, Assets, Credit, Appraisal value of the home you are purchasing and title report.
4. Based on the acceptability of all those criteria by the Lender's Underwriter according to accepted Underwriting Guidelines to approve mortgage loans, the Lender Approves your loan and issues a written "Commitment To Lend." That's the Real McCoy; the "final approval" if you will.

So you can see when a Loan Officer reviews Income and Asset documentation up front at the Prequalification stage, the experienced mortgage professional that she is can best assess your chances of a loan approval. And, at the end of the day, that's what a Prequalification truly is: an assessment of your chances of getting approved for the loan. The more experienced the mortgage professional, the better your chances.

Good luck!

Trevor Curran
NMLS #40140
0 votes
Mack McCoy, Agent, Seattle, WA
Sun Oct 21, 2012
The prefix, "pre-" gives it away.

A letter of "preapproval," simply states that you haven't been approved yet, but the lender things you may be.

"Pre-qualification" means that someone has asked a few cursory questions to see if you have a chance of actually being Qualified for a loan. It's like going out on a date - a prequal question might be, "Are you married? Seeing someone?" That doesn't qualify you, it simply "pre" qualifies you.

Final approval isn't just about the borrower, it's about the property, too. The borrower must Qualify - meet all of the requirements; and so must the Property.
0 votes
David Worters, Agent, Raleigh, NC
Fri Oct 19, 2012
The first two essentially mean that a lender has done a cursory review of your financial situation and, assuming that the representations you have made are truthful, that you appear to have the financial wherewithal to purchase either a certain property or a property of price $x. Final approval is actual approval, and it means you have submitted your documentation through a full review and that the lender is ACTUALLY prepared to loan you the funds. The primary purpose of the first are to help guide you in home selection so that you aren't looking at homes that are beyond your capability. Many sellers will want to see a pre-approval letter with your offer (despite the fact that they are fairly meaningless). With the new purchase contract that was put in place in North Carolina recently, the gold standard for a Buyer is to achieve final approval before leaving your due diligence period defined in the purchase contract.
0 votes
Dorene Slavi…, Agent, Torrance, CA
Fri Oct 19, 2012
You do need a good Pre-Approval for a loan before you begin your home search. A good Buyer Agent will insist upon this. You will provide a loan officer with all of your financial information so that they can determine what you can comfortably afford. Once this process is taken care of you will be in the right possition to make offers on property that meet your criteria.
0 votes
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