Home Mortgage Rates

Home Mortgage Rates

We have marketed bank-owned (REO) properties for the past  8 years and you would think by now most Realtors who have written at least a dozen or so offers to be able to distinguish a Pre-Qual from Pre-Approval?!

Well, we are not that lucky.

So at the expense of public service and helping our fellow real estate brokers allow us to explain what the difference between Pre-Approval and a Pre-Qualification for home buyers.

Pre-Approval:  Pre-approval process is identical to a purchase loan application without having a property identified.  To develop a pre-approval most reputable lenders require a a completed and signed 1003 Mortgage Loan Application by everyone who is going to be on the loan for the home purchase.  This application identifies the Employment, Bank Accounts, Assets and other Real Estate held by all applicants.    The  lender is authorized to complete Employment and Asset Verification as part of their due diligence before then can issue a pre-approval.    The final step in the Pre-Approval process is to determine the borrower’s buying power and how much loan they could afford.

Once Mortgage Loan Application is processed by the underwriters at the bank, the resulting Document is a Pre-Approval which is only conditioned on the value of the property the borrowers can afford to purchase.   In other word, the loan approval is only conditioned on the price of the property that the buyers identify.  Pre-Approval could also identify the loan Number, Rate and term of the loan as well.

Pre-Qualification:   Pre-Qualification is a simple letter that is issued by some lenders without the benefit of  Mortgage Loan Application processed!!  Mortgage Brokers, Correspondence Lenders and loan officers issue these Pre-Qualification letters and they are not worth the paper they are printed on.  Since no employment and asset verification are completed, most lenders refuse to accept these Pre-Qual letters.

So, your Mortgage lender or Loan Officer has not asked you to complete a mortgage loan application identifying your employment, bank accounts and assets; they are not a qualified buyer specially in this market where you would be competing with cash buyers.

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