Company

Communities

Sales

Contact

Southern Group Mortgage

Mortgage brokering services will be provided to you Fall 2006

Pre-Approval vs. Pre-Qualification

Be aware that the terms “Pre-Qualify” and “Pre-Approval“ do not have a standard definition in the mortgage lending industry and are many times used interchangeably. In some cases, a “Pre-Qualification” with Lender A is the same thing as a “Pre-Approval” with Lender B or vice versa. Because of this, our information below combines the terms into “pre-approval/pre-qualification” in order to lessen confusion for you, the consumer.

• In general terms, it means a lender feels you can borrow a given amount under the rules for a particular loan program.
• People interested in buying a house can often approach a lender, who will check their credit and verify their income, and then can guarantee they would be able to get a loan up to a certain amount.
• When shopping for a home, a letter from the lender stating how much you are approved or can qualifiy to borrow can possibly give you an advantage over others because they can show the Seller that you are not only serious but guaranteed to be able to buy the house.
• The process determines how much money a prospective homebuyer or refinancier will be eligible to borrow prior to application for a loan. A pre-approval/pre-qualification includes a preliminary screening of a borrower’s credit history.
• You want to pre-qualify before you enter the marketplace so you know how much house you can afford.
• The pre-approval/pre-qualification process helps Buyers better understand what they can afford, and it also helps in the negotiating process.
• Now is the time to get as much of this process done. Waiting until you have already engaged into a contract only puts more unwanted and unneeded pressure on an already potentially stressful situation.
• If you pre-approve/pre-qualify with a lender, you do not have to use that lender.
• Some lenders charge to pre-qualify, most do not.
• In a pre-approval/pre-qualification, lenders will look at your income, debts, available cash, and credit.
• Many lenders will run a credit check as part of this pre-approval/ pre-qualification process.
• To give you a firmer commitment to your lending, a lender may contact the borrower’s employer, bank and other places to verify all claims of earnings and assets. In return, the borrower receives a letter stating the lender is willing to grant a mortgage for a specified amount, within a limited period of time.
• A lender will then provide a pre-approval/ pre-qualification letter showing how much it is believed that you can borrow. Most pre-qualification letters are NOT absolute loan commitments, but instead show that you have spoken with a lender and now have a reasonable estimate of your borrowing ability.
• Information submitted during pre-approval/pre-qualification is subject to verification at application.
• The more guarantee a Mortgage Lender can give you, in most cases, means more scrutiny into your personal credit related information in order obtain your ability to borrow in advance. This simply mean that more of the researching into your personal credit related information is done sooner (in advance) rather than later.
• The better guarantee a lender can offer you the better advantage you will have over other Buyers from the Sellers perspective.
• Show the Seller a pre-approval/pre-qualification letter and it's clear that you have a reasonable ability to finance a given level of debt.
• No matter what it is called, pre-approval or pre-qualification, the better guarantee a Mortgage Lender can provide you, the better guarantee you can provide a Seller that you can and will buy their house.