Difference Between Pre-Approval Versus Pre-Qualification

Strength And Difference Between Pre-Approval Versus Pre-Qualification

This BLOG On Difference Between Pre-Approval Versus Pre-Qualification Was Updated On May 5, 2017

Home buyers can go to  www.gustancho.com and click on the FAST QUOTE icon on the top RIGHT section and complete and submit the questionnaire, they have started the pre-qualification process.

  • FAST QUOTE is a simple one page questionnaire mortgage applicants complete and a loan officer will get back to them
  • Difference Between Pre-Approval Versus Pre-Qualification is that a pre-qualification is more general and not intense like a pre-approval process
  • Loan Officer will qualify the borrower over the phone and ask them certain questions with regards to income, credit, debt, and public records
  • Once borrowers are pre-qualified, they can proceed to the next phase of the mortgage process which is the pre-approval process
  • To get pre-approved with The Gustan Cho Team, borrowers need to click the APPLY NOW icon on the top right and complete the four page online secured mortgage loan application
  • Once they complete and submit the online mortgage loan application, they will be contacted and whether myself or one of my loan officers will go through the loan application and get the pre-approval mortgage process started
  • There is a Difference Between Pre-Approval Versus Pre-Qualification
  • Loan officers will run credit, review tax returns and W2s, go over the borrower’s past 30 days paycheck stubs, and run the file through the Automated Underwriting System prior to issuance of pre-approval
  • The Difference Between Pre-Approval Versus Pre-Qualification is with a pre-approval, the borrower is ready to enter into a real estate purchase contract
  • Whether it is a purchase or refinance, the process is the same
  • Loan officer will go over the basic income and expense of borrower, as well as the co-borrower
  • We will be going over your credit situation and assets as well as liabilities
  • I will then tell you what you qualify for and the basic terms and rates. 
  • Borrowers will know whether you qualify for a mortgage with a prior bankruptcy or foreclosure or whether they need to wait. 
  • If borrower’s credit is bad or do not have qualifying credit scores, they will be advised on how to repair and boost credit scores
  • Borrowers with judgments, the loan officer will instruct on how to negotiate the judgment or make payment arrangements in order to qualify for a mortgage
  • Loan officers can help borrowers correct errors on credit report

Waiting Period After Bankruptcy And Foreclosure To Qualify For Mortgage

There are mandatory waiting periods to qualify for home loans after bankruptcy and/or foreclosures:

  • There is a waiting period of 2 years for folks who filed bankruptcy from the discharged date of the Chapter 7
  • Borrowers who just filed bankruptcy can start re-establishing their credit
  • Home buyers under a Chapter 13 Bankruptcy Repayment period can qualify for FHA LOANS one year into their Chapter 13 Repayment period with Trustee approval
  • There is no waiting period to qualify for FHA LOANS after Chapter 13 Bankruptcy discharged date
  • Home buyers who had a prior foreclosure, short sale, or deed in lieu of foreclosure, there is a waiting period of 3 years from the the date the deed of the foreclosed home was transferred out of your name to the bank’s name or the date of the sheriff’s sale
  • The deed transfer date is extremely important
  • Just because homeowners turned keys in and got a receipt by lender does not mean that is the date of the foreclosure and the clock started ticking
  • The 3 year clock starts ticking from the date of official transfer of the deed out of the name of borrower and to the name of the lender or the new owner of the property
  • There are so many cases where the homeowner turns in keys and their home is foreclosed but the bank is in no hurry to transfer the deed to their name
  • It might be five years before the bank transfers the deed 
  • The 3 year waiting clock starts ticking at the 5 year mark

Getting Approved And The Difference Between Pre-Approval Versus Pre-Qualification

Once home buyers are pre-qualified for a loan, the next step is to get pre-approved if they are planning on purchasing a home.

  • There is no reason why borrowers who are issued a pre-approval not to close on their home loan
  • The final step of the mortgage process is the clear to close which means that the lender is ready to prepare closing docs and fund the loan
  • Main reason for last minute mortgage loan denial or stress during mortgage process is due to the fact that loan officer did not properly qualify borrowers
  • Most residential loans close in 30 days or less after the borrower has signed the disclosures
  • With a constant stream of new lending guidelines, volatile mortgage rates and tightening regulation from Washington, very few real estate agents will show new homes to a potential home buyer without at least a pre-approval letter

Benefits And Difference Between Pre-Approval Versus Pre-Qualification

  • It states the loan amount and rates and terms the borrower is qualified for and the type of loan program: FHA, VA, USDA, CONVENTIONAL, NON-QM, JUMBO, INVESTMENT HOME LOAN.
  • It gives borrowers estimate of what the total monthly housing payment will be, which includes taxes, insurance, and homeowner association dues if any.
  • Submitting a strong “Pre-Approval” letter with a purchase offer will let the seller know you are a serious and strong buyer and will take your offer seriously and start the negotiation process

Common Loan Pre-Approval Documents Required

In order to start the mortgage process, there are certain documents that is required.

Here is a list of documents required to process mortgage

Income / Assets for Wage Earner:

  • Last 2 year W2s and Tax Returns
  • 2 most recent Pay Stubs
  • 2 most recent Bank Statements, 401(K), Liquid Assets, Investment Accounts

Income / Assets for Self-Employed:

  • Last 2 year Tax Returns – Business and Personal
  • Last Quarter P&L Statement

Letter of Explanation For:

  • Employment Gap or New Line of Work.
  • Late Payments / Judgments / Bankruptcy on Credit Report.

Other Documents Needed

  • Bankruptcy Discharge is it applies to the borrower.
  • Foreclosure paperwork if it applies to the borrower.
  • Child Support Documentation if it applies to the borrower.
  • Lease Agreements if you have investment rental income.
  • Mortgage Payment Statements if you own other residential or investment properties.

Ask a lot of questions and make sure your loan officer is available at all times

Borrowers need to feel comfortable with communicating with your loan officer

  • Borrowers should ask your loan officer as many questions as possible
  • A loan officer should be available 7 days a week and should always promptly return all of your calls
  • Loan officers are extensively regulated and the majority of licensed mortgage loan originators will act on the client’s best interest

If you are looking to obtain a home purchase loan or a refinance loan, feel free to contact me at 262-716-8151 or email me at gcho@gustancho.com.  I am available 7 days a week.

Gustan L. Cho NMLS ID 873293

Residential and Commercial Lender

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