 Prudential Lifestyles Real Estate, Brokerage |
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 Should You Be Pre-Qualified or Pre-Approved? That depends on whom you ask. It seems that definitions can vary from lender to lender and individual to individual. While most discussion, written and verbal, compares pre-qualification to pre-approval, lenders actually offer three levels of services to qualify a borrower for a mortgage-pre-qualification, pre-approval and final commitment ("Pre-Qualified or Pre-Approved: What's the Difference?" posted June 12, 2000, at the Cincinnati Board of REALTORS®, cbor.org) Pre-Qualification Usually, in just a 15-minute phone call, a lender can pre-qualify you for a mortgage. Because the lender's underwriters do not validate credit history or employment information for pre-qualification, this preliminary review results in a non-binding opinion regarding how much of a mortgage a borrower can afford. By seeking pre-qualification, you'll come away with an estimated monthly payment and a price range to shop based on the loan size. This information, however, is intended to be a guide as you begin the home buying process. It does not guarantee that you'll be approved for a mortgage. Pre-Approval The closest thing to a guaranteed loan comes with pre-approval. After completing a formal application and providing all the necessary documentation related to employment and financial disposition, the file, along with a full credit report, will be thoroughly evaluated and verified by the lender's underwriters. If everything meets to their satisfaction, you will be cleared for a loan of a determined amount. This in no way means you have a firm commitment though. The loan is subject to a fully executed sales contract and an acceptable appraisal. But being pre-approved can give you a sizeable advantage. Many lenders present borrowers with a letter, which may give you more leverage with a seller. Firm Commitment The lender can issue a firm commitment once the seller accepts your offer, the home has received a satisfactory appraisal, and your credit has been rechecked. If all checks out, you've got a mortgage! To help eliminate unwanted surprises, keep these tips in mind:
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© 1998-2004, An independently owned and operated broker member of Prudential Real Estate Affiliates, Inc. A Prudential Financial company, owner of the trademarks. Used under license. Prudential Financial, Inc. of the United States is not affiliated with Prudential plc which is headquartered in the United Kingdom. |
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