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Mortgage Pre-Qualification vs. Pre-Approval: What's The Difference?
It is important that you understand the basic difference between
being "pre-qualified" or "pre-approved" by a mortgage lender as
you are looking for a home to purchase. A pre-qualification is
not the same as pre-approval. The buyer, seller, and agents
involved in the transaction need have the same agreement
regarding the buyer's ability to close the purchase.
Your realtor will want you to talk with a mortgage company as
soon as possible. The reason is that the realtor needs to know
the top price range you can afford and housing expense you are
comfortable with. It also helps your realtor when presenting an
offer to the seller's agent to show that you have taken steps to
approval. It may very well help persuade the seller to accept
your offer. In many housing markets the pre-qualification or
pre-approval letter is accepted as part of the purchase
presentation to the seller's agent.
When you are speaking with a loan officer to be pre-qualified
you are giving information about your financial condition. The
loan officer will also ask questions regarding your credit.
There may even be a credit bureau drawn to see where you stand.
Then the loan officer will give you an opinion of how much you
can afford based on the information you have told that person.
This is not a commitment to make the loan! You should be given a
letter that states the pre-qualified mortgage amount and type of
loan. It should state further that loan approval could be issued
after the information you gave is verified & formally
underwritten.
When you receive a pre-approval it has more weight than a
pre-qualification. The pre-approval letter will give the maximum
loan amount with the specific details of the total mortgage. It
should have only conditions such as clear title report,
underwritten appraisal, general closing conditions and no
negative change in your status as a buyer.
If you are serious about buying a home, and you are satisfied
with the mortgage company, you should get as solid a
pre-approval as you can. You don't want any surprises along the
way.
About the author:
Bill Wehr has been in home loan origination for over 25 years.
He is the owner of Great Pacific Northwest Mortgage
http://www.billwehr.com , a residential mortgage company serving
Oregon and Washington.
Written by: By Bill Wehr
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