Pre Qual versus Pre Approved Letters

Basically, being prequalified means you had a conversation with a loan officer about
some basic information and a determination was made that you “should” be able to
be approved for a loan. The conversation entails getting questions answered like how
much income do you make, what other debts you have like credit cards and car
payments, what credit score you think you have, etc. To be approved for a loan you
need to meet certain guidelines. Your loan officer knows those guidelines and gets a
good enough picture on whether you will be good to go or not.
A preapproval eliminates all doubt and gives you the confidence to put an offer on a
home with certainty that you will qualify and close on your mortgage to purchase
your home. There are still some factors like your inspections and appraisal that can
hold things up but the items in your control are ready to rock.
Your preapproval letter is what your real estate agent wants before she or he gets you
in their car to go see homes on the market. Most agents will require it. It also is used
in conjunction with the offer letter on a home to strengthen your offer.
The preapproval letter is furnished after you provide all the necessary information
and documentation your loan officer needs to get you pre approved. Your credit will
be pulled so that not only your score is determined to meet minimum score
requirements but so all stones are overturned. It is needed to show that you have no
bankruptcies, foreclosures, past due payments on debts, etc. If there are issues like
that, “seasoning” guidelines will have to be met. Also with full transparency of all
your other debts, your debt to income ratio can be calculated to ensure guidelines for
that are met. To show for your income your loan officer will ask for W2’s and
paystubs. If self employed then tax returns, profit and loss statements, bank
statements, etc. are collected. Then assets will need to be shown for funds so it is
know you have enough to cover the down payments, closing costs, prepaids like per
diem interest and your escrow account to pay your taxes and insurance within your
mortgage payment. These are a number of the items needed, so you get the picture
that the preapproval is no joke. This is why once received, it is so empowering in
your home search and it will actually make the process a lot more fun since any trace
of doubt in any situation is simply no fun.
So if you are just starting to look into the idea of purchasing a home, the
conversation with your loan officer about a prequalification should suffice for the
time being. When getting close to being actually serious about buying a home, work
with your loan officer to get that preapproval. It will save you time in the long run,
avoid any initial issues and make the submission of your file to underwriting much
faster when your offer is accepted. If and when you have any questions on anything,
be a squeaky wheel and ask your loan officer anything and everything. She or he is
there to help you accomplish goals and bring light into the dark room of the
mortgage process. A lot goes into obtaining a loan but your loan officer is there to
make it a smooth and positive experience.