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Pre-Approved vs Pre-Qualified
Are you really pre-approved for a loan or merely pre-qualified? The difference between the two terms will be crucial when you decide to make an offer to buy a home.
To get pre-qualified for a loan, you must supply your loan officer with information about your debt, income, and assets. He or she will look at your credit profile, assess down payment needs and get an idea of which loan programs will work for you. Then he or she will issue you a pre-qualification letter indicating the amount you are pre-qualified to borrow.
It is important to understand that a pre-qualification letter is just an estimate of what you are eligible to borrow, not a commitment to lend.
To get pre-approved, on the other hand, you will complete a mortgage application and provide information verifying your employment, assets and financial status by supplying W-2 forms, bank records and perhaps credit card statements. The loan officer will review your mortgage options and submit your application to the lender that best meets your needs. Once the application process is complete you will receive a pre-approval letter indicating the amount your lender is willing to lend you for your home.
Being pre-approved means an underwriter has actually reviewed your file, while getting pre-qualified does not. Getting pre-approved for a loan gives you competitive advantage when the time comes to bid on a home because you have been approved for a loan for a specified amount.
A pre-approval letter is not binding on the lender; it is subject to an appraisal of the home you wish to purchase and certain other conditions. If your financial situation changes (e.g. you lose your job), interest rates rise or a specified expiration date passes, your lender must review your situation and recalculate your mortgage amount accordingly.
For Rapid and efficient pre-approval, contact Bob Roscoe, Mortgage Marketing Associates, Minneapolis, Minnesota, at MMAMortgage.com.
