Premiere Mortgage Services Inc. - Dana Bain

Pre-Approval vs Pre-Qualify Dana Bain Premiere Mortgage Services Inc. 978-422-2311

November 4th, 2013 9:36 PM by Robin Bain

Pre-Approval vs Pre-Qualify

Before visiting your realtor, you can make the entire purchase process easier by getting a pre-approval from the lender. When you visit a mortgage professional, they will either "pre-qualify" or "pre-approve" your mortgage application. Understand the difference and set your expectations accordingly.

These two terms have become interchangeable through the years and that is unfortunate for many borrowers. Here is the real story.

With a pre-qualify, the mortgage professional reviews your finances, credit report and income and then, based on their experience, estimates an approximate amount of a mortgage that you should be able to qualify for.

With a pre-approval, you actually apply for a mortgage with an address "To Be Determined Later" and the application is submitted to a lender and an approval is issued subject to the home qualifying.

Be Prepared
With a pre-qualify, there still may be issues to resolve and the mortgage can take literally weeks to complete and have a closing on the home.

Unfortunately, many of these mortgage people will call a pre-qualification a pre-approval when this is not the case. There is a big difference. If you only talked to someone on the phone, you are not pre-approved. If you have not paid a deposit and signed an application, you are not pre-approved. If you are dealing with a mortgage professional who has not spotted a possible issue, you may not get a mortgage or have to pay a higher interest rate in order to get the loan.

Now, if this is a mortgage professional who you have worked with in the past and they know your financial history (not what you told them on the phone!) a pre-qualification may very well be just as good as a pre-approval.

Regardless of whther you have a pre-approval or a pre-qualification, neither is a guarantee that a mortgage will be issued for the home you have chosen. The home still must qualify too! If you offered more than the house is worth, the bank will not give you a loan.

The pre-approval is the actual process of applying for a loan and sending your loan application through the underwriting process. You will receive a commitment for a loan up to a certain amount that is conditional upon an appraisal of the the desired property meeting the bank's approval and the purchases price.

The largest advantage to this process is time. When you need just an appraisal, the time between the signing of the purchase agreement and the day of closing is in the range of 1 to 2 weeks whereas the entire loan application process takes 30-45 days.

You should apply for the maximum in a pre-approval. You can reduce the mortgage amount in a day or two, maybe even hours. Increasing the mortgage amount is the same as going through the approval all over again.

Since you will surely have the time to get this pre-approval in hand as it will take you some time to find the right house to meet your dreams, why not use some of this time to get a pre-approval?

If you are looking for a quick indication of whether you will qualify for a loan, many mortgage bankers will pre-qualify you.

A pre-qualification is a peek at your assets and liabilities, your annual income and a determination of how much of a mortgage payment that you should be able to afford assuming that none of these conditions change before the settlement date.

The mortgage professional will then issue you a "pre-approval" certificate or letter on company letterhead indicating that they have reviewed your finances and that is appears that you could qualifyfor a mortgage loan up to $XXX.

A note of caution: A pre-qualify is NOT a guarantee that you will get a loan. This is only an estimate.

What should you really do?
Start with the mortgage professional, not the realtor. You will have less stress, you will close the house faster and you will likely win a close race between buyers if you actually have a pre-approval rather than a pre-approval certificate.

These terms are interchangeable in the industry so make sure to ask which of these types of approvals that you are receiving.

Of course, it is very easy to tell if you receive a "pre-approval." If you have not signed an application and just given information over the phone, your approval is nothing more than an estimate of whether you will qualify for the loan.

Do not expect more than you have given to the mortgage originator! If you have not given a deposit and taken the time to get a true pre-approval, you can count on having many more steps in the process to go through.

Give me a call or fill out the and we will discuss the options that are available for you!  
Call Premiere Mortgage Services Inc. Dana Bain & Robin Bain at 978-422-2311  Serving Clients For Over 30 Years.  Serving all of MA & NH.
Posted in:General
Posted by Robin Bain on November 4th, 2013 9:36 PM


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