Mortgage Pre Approval vs. Pre Qualification
Mortgage Pre Approval and Pre Qualification are lending terms have been thrown around loosely (often interchanged), and have caused some confusion among home buyers and Realtors.
The term Pre Qualification typically describes a conversation held between a potential borrower and a mortgage loan originator. This conversation might include a discussion of credit, income and possible assets of the applicant.
Under this scenario, the information is probably not being verified with documentation or research of any kind. During this initial stage, an idea or “ballpark figure” of what the potential applicant might qualify for could be discussed.
Serious buyers know that in order to have their offers considered, they’ll need to be submitted with a real Mortgage Pre Approval Letter. Most mortgage companies will not issue a Mortgage Pre Approval Letter without examining the borrower’s credit report, income documentation, and any liquid assets available.
The Mortgage Pre Approval goes one step further. An underwriter will calculate (based upon documentation supplied by the borrower) the maximum loan amount for which the borrower would qualify. Once the loan scenario has been reviewed and approved by underwriting, the borrower receives a loan commitment from the bank.
The Mortgage Pre Approval Letter is then written to illustrate the borrowing power of the potential buyer. This is extremely helpful when submitting offers, as it gives the seller confidence that the buyer’s deal will not fall through (due to financing).
I have personally been a part of deals that were accepted because my buyer’s offer included a Mortgage Pre Approval Letter.
Obtaining a Mortgage Pre Approval is relatively easy. Your basic personal and employment information is collected (usually on an application). Income and asset documentation is also collected and reviewed. Typically, 30 days of pay stubs, the last two years of w-2’s (or tax returns) and two months of bank statements are what is needed.
You can read more about getting a Mortgage Pre Approval here…
Did you obtain your mortgage pre approval letter before house hunting?
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