Pre Approvals

[Mrs Wolfie]

If you have had any interaction with a realtor, you know that many will not show you a property without a preapproval letter. What is this? A preapproval letter is a letter from your mortgage lender stating how much they are willing to finance you for based on your credit. It will include how much you are going to put down and how much they will give you. Most large banks and mortgage lenders offer these letters. The process is very similar to taking out a home loan application in that they will process your credit and then give you an answer. No funds will actually cross hands until you come back to the bank with a property in mind to buy.

[Lyricb]

Good post. Everyone should also be made aware, though, that a preapproval letter is NOT the same as a pre-qualification letter, no matter what the lender tells you!

[Mrs Wolfie]

Well put, Lyri! True, know that this is only a CREDIT approval. What you may or may not end up with is going to depend solely on the property you choose and how your credit holds up to at the time.

[Lyricb]

Oh, another good point. You may get preapproved, but then if you run out in the interim and lease a car or something then you may not be able to remain in a preapproved status.

[Zanzi]

You are right, this is important information! Not only for someone looking to buy a home, but also for someone selling a home who is comparing a number of offers. While – if given a choice – a seller will almost always prefer someone with a pre-approval letter in hand, the pre-qualification letter is gold!

[Avian]

Everyone should know about this beforehand. Being prepared is crucial to having an easy process.

[peacherina]

Yes those pre approval letters can be quite tricky. I have been confused once or twice by those. Now I know that pre approved doesnt mean that you are qualified like Lyric stated.

[r8rpwr]

A lot of this depends on the area, the market, and the seller.

[muslgrl]

That is a very good podt but when i was looking for a house I had realtors show me property before I had a pre approval. I think it just makes things go a little quicker

[muslgrl]

DISTINGUISHING PREQUALIFICATIONS FROM PREAPPROVALS

Determining whether a request by a potential applicant is for prequalification or preapproval is critical in deciding what applications to report under HMDA. The primary differences between them are that a prequalification is a less formal request in which the underwriting is less rigorous and the lender makes no binding written commitment to provide financing. The commentary to Regulation C differentiates between them as follows:

PREQUALIFICATION

A prequalification request is a request by a prospective loan applicant for a preliminary determination on whether the prospective applicant would probably qualify for credit under an institution's standards or for a determination of the amount of credit for which the prospective applicant would probably qualify.

PREAPPROVAL

A preapproval request is a request by a prospective loan applicant in which the lender has calculated the applicant’s buying power and has committed in writing to make the loan, provided the home's value draws an adequate appraisal. The lender verifies the applicant’s income, asset and debt information. Preapprovals are generally more time-consuming than prequalifications because the lender may request copies of tax records, pay stubs and bank records, and may pull a copy of the applicant’s credit report and check for any inconsistencies in work or credit history.