Mortgage Info

Pre-Approval or Pre-Qualification

I highly recommended you meet with a mortgage lender and get Pre-approved for a mortgage. What you need to know is the difference between a Pre-Approval and a Pre-Qualification! A common occurrence with some mortgage companies and banks is to promise a loan approval, when all that is actually being issued is a very conditional pre-qualification.

Scenario of a Pre-qualification: You meet with a loan officer and the loan officer indicates there will be no problem and will give you a certificate indicating your loan has been approved. The pre-qualification process occurred in less than an hour. Look at the certificate ---- does it have a long string of contingencies? Usually like verification of employment, verification of W2's, verification of rent payment or mortgage payment, verification of funds to close, etc. This is not worth the paper it's written on and will not give you much negotiation power if any at all.

Scenario of a Pre-approval: You meet with a loan officer and they will take all your information and make copies of your most recent pay stubs, w2's, tax returns, bank statements, complete list of debts etc. In most cases the loan officer is not the decision maker; your information will be submitted to an underwriter for credit review and verification of information submitted prior to issuing an approval letter. The only contingencies on a pre-approval letter should be ones like properly executed purchase agreement, adequate appraisal, clear title and the buyer's credit and job information unchanged. Print off a list of items to bring for your pre-approval.

What to get qualified for: Make sure your lender has your maximum payment amount on your pre-approval letter. Is that payment for Principal & Interest only or the total payment including taxes, hazard insurance and/or mortgage insurance? If they only give you a price range of the home you qualify for and rates go up or down, or property taxes are higher on the home you find that could spell trouble.

A true pre-approval will give you a better negotiating position when it comes time to make the offer on the home you have found.

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