What is the difference between a Pre-Qualification and a Pre-Approval? A pre-qualification is a preliminary finding usually provided by a mortgage professional to a home buyer using information obtained during an interview. The mortgage professional asks the home buyer such questions has ...
1) What is your current gross income per month or year?
2) Where do you work? How long have you been with your current employer? What is your job description?
3) Are you self-employed, and if so, what has been your 'net income' average over the last two tax filed years?
4) What are your 'source of funds' for down payment, etc.?
The mortgage professional will also asked if they have permission to pull the home buyer's credit report w/ FICO score.
An analysis from the information provided to the mortgage professional by the home buyer (such as 'debt-to-come ratios, amount of available source of funds, FICO scores) will designated if the home buyer can purchase a home and to what amount in purchase price and loan amount the home buyer can obtain.
Usually, the analysis will not take long and if the home buyer is 'qualified' the mortgage professional will provide a letter of 'pre-qualification' to the home buyer stating the findings and the limits on what the home buyer can afford in a mortgage.
Basically, a pre-qualification is an opinion of the mortgage professional.
A 'Pre-Approval' is much more in depth. An actual 1003 (Loan Application) is completed and signed/date by the home buyer and provided to the mortgage professional along with the proof of 'source of funds' for the downpayment. Also, the mortgage professional will ask for the previous years tax returns and/or W2s along with the most recent 30 days of paystubs. With this information the mortgage professional can upload (or submit to a mortgage lender to upload) the 1003 with either Fannie Mae's Desktop Underwriting or Freddie Mac's Loan Prospector (these are not the only two automated underwriting systems used, but the most common). Once uploaded the mortgage professional obtains a detailed written analysis from Fannie or Freddie ... in seconds. The findings tell if the home buyers is 'Approve/Eligible' if Fannie Mae or 'Accept' if Freddie Mac (there are other approval levels). Usually sponsored by a mortgaqe lender, the mortgage professional can release the findings, and begin the loan process.
Seller's and Listing real estate agents prefer obtaining a Pre-Approval letter over a Pre-Qualification letter in that the pre-approval letter means (but does not guarantee) that the home buyer has a mortgage already in process and obviously pre-approved.
I do not charge any FEE whatsoever to do a 'Pre-Approval' for home buyers. If you required mortgage assistance and want to find out what you can obtain in a home purchase and mortgage give me a call or email.
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2 comments:
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An approval letter is important because this document shows that you have the right to a certain piece of property.
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