Purchase Mortgage Pre-Approval Versus Pre-Qualification
This BLOG On Purchase Mortgage Pre-Approval Versus Pre-Qualification Was Written By Alex Carlucci of Gustan Cho Associates
Is there a difference between Purchase Mortgage Pre-Approval Versus Pre-Qualification?
- Well, lets back up a bit
- What is the purpose of the Pre-Qualification or Pre-Approval letter?
- Basically home seller wants to know if the buyer can buy their home based on the terms offered by the potential buyer
- The terms offered usually include a clause that indicates a part of the purchase price will be borrowed by the buyer
No one wants to go through a drawn-out purchase transaction process only to discover that the borrower can’t get the loan as proposed.
How To Avoid A Stressful Mortgage Process
So how do we avoid these situations? The answer is a good thorough honest exchange of information early in the process.
Early on, I often tell my clients two things:
The first thing I tell them is:
- “Based on our phone conversation and a credit report, I can tell you if you are qualified to purchase the home you wish to purchase. “
The second thing I tell them is:
- “Lenders have really 2 approvals
- The first is the conversation we just had
- We can say yes, that is a loan we will do, or no, we will not do that loan
- That’s the easy part
- That takes about 2% of our effort
- The second approval, and the one we spend 98% of our time on… is
- Do we have all the right pieces of paper (digital paper these days) in the file that back up the first approval“
The more documentation the borrower can provide initially to the loan officer, the higher the confidence level in the qualification. If you are thinking “I doubt if they will need to see that” about something the lender might want, think again.
Initial State Of Mortgage Process On Purchase Mortgage Pre-Approval Versus Pre-Qualification
Honestly, it is difficult to cover all issues “upfront”. The loan officer needs to ask questions to uncover possible issues. The borrower needs to be honest about their situation. However, oftentimes things that seem like non-issues to the borrower turn out to be deal killers or deal delayers.
Examples of small things that can come up later include:
- Past gaps in employment
- Job changes
- Thinking an ex-spouse makes joint debt payments on time
- Writing off unreimbursed business expenses
- Child Support payments
- Unstable future unemployment or planned retirement within 3 years
- Borrowing money a week or two before closing for a new car, a boat or appliances
- Not being able to verify the funds deposited into a liquid checking account to be used for closing
- Working for a previously undisclosed family business at a large increase from previous employment
- Excessive non-borrowing spouse debts on community property states
Ask any loan officer and I am sure they can add to that list.
Purchase Mortgage Pre-Approval Versus Pre-Qualification Differences Among Lenders
So back to the initial question of the difference between Purchase Mortgage Pre-Approval Versus Pre-Qualification – frankly there is little difference. You should make sure that the borrower’s credit was pulled and reviewed. Make sure that the loan officer or lender rep ran the borrower’s information through one of the automated underwriting systems and received an approval. It’s also a good idea for the buyer’s and seller’s Realtor to talk to the lender about the qualification and if there are any potential traps on the horizon.
Good luck with your qualification and as always if we can help you don’t hesitate to call/text or email us.
About The Author Alex Carlucci
Alex Carlucci is the author of this blog on the Difference Between Purchase Mortgage Pre-Approval Versus Pre-Qualification. Alexander Carlucci is a contributing writer for Gustan Cho Associates Mortgage News. Alex Carlucci is also a senior vice president at Gustan Cho Associates and is based in our corporate offices in Lombard, Illinois. Able to do business in multiple states, Alex Carlucci is one of the very few mortgage banks nationwide who have very little to no mortgage overlays. Alex Carlucci and his team of experienced loan officers with borrowers help countless of borrowers nationwide qualify for a mortgage when other lenders cannot. Alex Carlucci is a senior managing member of Gustan Cho Associates Mortgage Group.