Pre-qualified versus pre-approved

10 Replies

What exactly is the difference between getting pre-qualified and pre-approved for a loan? Is one better than another??

yep,
Borrowers for HOMES/REAL Estate get "pre-qualified"(read=for "UP TO" a specific amount based on Income, Credit Scores, Reserves, & Backside DTI(debt to income ratio, based on the New Purchase monthly payment added to existing obligations)

Note2Nate=ALL better(read=competent/successful) Real Estate Agents want to see Your LETTER of pre-qualification BEFORE showing You property(s)...time=$$

*I provide those letters* :D

Credit Cards & occasionally Car dealers tell you You're "Pre-Approved";

Hope this helps,

--Mick

You never explained what pre-approved means, though. I get it for credit cards, but how does it work when looking for a home?

Originally posted by "NateRoman":
You never explained what pre-approved means, though. I get it for credit cards, but how does it work when looking for a home?

Nate, I was trying to deal w/it in a joking way , however there is no such thing as a "pre-approval" for a home loan, & if somebody out there is using the term, they're merely interchanging the qualification terminology;

& considering the C/Cd & automobile industries "hi-jacking" of the terminology, I'd never want a "pre-approval" letter;
then again, that's just me?

FYI, in our industry...they'd be the same thing;

You sure? I've heard both used here in California. Is it different here then where you're from? Does anyone else know? No biggie on the joke....its all good!

"Dude"/Nate....I couldn't & wouldn't for a SECOND begin to address how they "do it out Your way"....as Calif. Has some pretty weird laws, even regarding Real Estate;
Check w/a R/E atty for a straight answer....
1 phone call should have U squared away;

Pre-Qualification
Based on information given and Credit Pull usually done is 5 - 10 minutes once all documents are received. Documents are usually W-2's, tax returns, paystubs, or financial statements. Than the Credit Pull is a Tri-Merge Credit Report from all three agencys. Once the information is received or given over the phone or person a Pre-Qualification can be determined from that minimal information alone. The Tri-Merge report is the key to this Qualification.
720 + No problem can qualify off Tri-Merge report up to $500,000
680 - 719 Tri-Merge Report and minimal documentation
679-620 Tri-Merge Report and financial documentation
620 and Under Tri Merge Report and Copies of Financial Documentation

Pre-Approval
Signed or Unsigned 1003 (1003 is your Mortgage Application that you signed or the loan consultant asked you the verifiable question on the Application)
Tri-Merge Report
Financial Documents that you sent to the Loan Consultant

Once all documents are received the Loan Consultant will fax all information over to the Bank of your/his/her choice and the Underwriter of the Bank will do a quick review of the documentation received and than determine how much you will qualify for and at what interest rates you will obtain. They will than fax over a Pre-Approval with the banks name on header stating that you have been Pre-Approved from such amount and such interest rate based on the information provided. At that time as well they will also send the loan consultant a list of additional documentation for him/her to retrieve to begin the loan process. This is usually good for 30 days since rates vary monthly.

Recap:
Pre-Qualification done in 5-30 minutes
Pre-Approval done in 24-48 hours

Hope the above information is helpful and need a list of documentation to provide before you start your loan process please email me and I will email you one.
Tip: The more documents you have at the beginning of the loan process the faster the loan consultant, loan processor, and banks underwriter will process and finish your loan.

This is a long and detailed answer. But, it gets the job done.

Thank you jandr for a straight answer. I get it. I hope mortgageman can learn from this as well.

jandr is exactly right,
I just never contemplated "pre-approval" aka
"shopping the loan" as a bona fide system.

I do my job, and then based on knowing the matrices HAVE a home for the loan based on familarity with lenders and their programs Before Submitting same.

Lenders don't like(as a rule) multiple "submissions" while I know this was never mentioned by jandr, this is what 1 would be led to beleive.
We don't submit partial or full packages to lenders (normally) for a "pre-approval", we submit them for FINAL approval, clearing of conditions, and funding.

I have submitted contingent on credit, spoken w/head underwriters, etc., just prefer to not "shotgun" or even solicit the file unless 95-99% feedback from A/E/Underwriter is positive and we're just dealing with a specific exception to their guidelines...

it is NOT wise (imho) to submit a "package" to either multiple lenders, nor to "partially submit" a file unless there is some specific issue w/the borrower/property that needs to be dealt with in advance of complete submission. I've never considered this to be "pre-approval", though I certainly see how it could/would be consdered as same. No "hard feelings" and an FYI for anybody contemplating the "I'll send the file to a doz. different lenders and see who says yes first"....You won't have too many lenders to call on real quick like? You may even be unemployed real quick like?
MOST(if not all, however I'm not an expert so I can't SAY ALL) lenders require an "Assignment of File" letter on the Top of the File stating that YOU ARE NOT Submitting to anyone else...and You'd be LYING with every signed letter to all after the 1st lender?
Know Your lenders, and don't be afraid to ask A/E's and Especially Underwriters for SPECIFICS about Your "situation" making the file "outside the box".
Sorry if I caused confusion w/my original posting,

--Mick

"I sell Money...Need Some?"

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