Pre- Approval is a More Involved Process Than Pre-Qualification

by Ellen Garcia 10/01/2020


 Photo by Tayeb Mezahdia via Pixabay

When you start looking for your dream home, you need to know how much mortgage you will qualify for. Your real estate agent might ask you to get a pre-qualification letter. However, just because you are pre-qualified doesn’t mean that you will get the loan. You need a pre-approval for that, and even then, the mortgage company might not approve your application.

Pre-Qualification

A pre-qualification letter just tells you how much loan you can afford. The lender does not check your credit, your debt-to-income ratio or other factors before issuing a pre-qualification letter. Additionally, a pre-qualification letter is dependent on the information you provide to the lender. The pre-qualification essentially gives you an estimate of how much home you are able to afford so that you do not look at homes that are not within your range.

To get a pre-qualification, you supply the lender with your assets, debt and income. Because the lender bases its decision on the information you provide, rather than information from outside sources, a pre-qualification is not a guarantee that you will get the loan.

Pre-Approval

Getting pre-approved for a loan usually takes longer than getting pre-qualified. The lender pulls your credit report and might ask for additional documents, including tax records and bank statements. To get pre-approved, you must complete a loan application and provide your social security number. The lender might charge an application fee for a pre-approval.

With a pre-approval, you will have a closer interest rate assessment, that is usually not finalized until the loan goes through underwriting. Once the lender pre-approves you, it will send you a conditional commitment for the loan amount. You can look for homes at or below that price.

In a market when buyers bid against each other – a seller’s market – having a pre-approval letter might give you a step up with the seller, who will more likely choose an offer by someone more likely to get the loan. Thus, if you and someone else submit a bid on your dream home, but the other person only has a pre-qualification letter, the seller might accept your offer, even if it is not as good as the other buyer’s offer, simply because you are more likely to get the mortgage.

For a pre-approval, you will need to:

  • Complete the lender’s mortgage application;

  • Possibly pay an application fee;

  • Supply your social security number and allow the lender to pull your credit;

  • Provide financial information to help the lender make a decision; and

  • Tell the lender how much you plan to put up as a down payment.

After you are pre-approved and the seller accepts your offer, you will then have to provide the rest of the documentation to the lender, including the accepted offer, bank statements, retirement account statements, taxes for up to two years, proof of income and other documents that will help the lender come to a concrete decision.

About the Author
Author

Ellen Garcia

Ellen Garcia Broker, GRI, SRS, ABR, RSPS, SRES, RENE, MRP, LRS, LSE, LSS, AHWD, e-PROÒ Ellen believes that listening and understanding her clients' needs are the foundation of a successful business partnership. Her knowledge of the many unique communities in Fairfield County is an invaluable asset to clients new to the area, and she is able to help anyone moving to, from or within Fairfield County make an easier transition into a new home and community. For clients who are preparing to sell their homes, Ellen offers her first-hand knowledge of how to leverage the strength of a "brand" in showcasing and marketing their properties. Ellen offers a powerful advantage in bringing her skills and resources to work for her clients. With over 10 years, of full-time experience in the real estate industry, she is well-versed in the Fairfield County real estate market. Ellen has successfully completed: · Over 130 closed sales and rental transactions · Representing a dollar volume of over $65 million Ellen’s people skills lead the way in building a strong network to assist and support her clients in achieving their goals through every step of the real estate process: · Negotiations both local and global · New business development (sales & marketing) · Creative problem solving · Building partnerships · Tapping into Halstead Property’s network of 1100 agents in NYC and Lower Fairfield County Her career in Real Estate has been recognized with many awards including: "Agent of the Year” for Halstead Property Wilton and "Most Closed Sale and Listing Transactions” numerous times. Within Connecticut, Ellen has been recognized over the past several years as a "Connecticut Magazine 5 Star Realtor”. Awards 2016 & 2014 AGENT OF THE YEAR – HALSTEAD WILTON – HIGHEST GROSS SALES 2016 - 2011 CONNECTICUT MAGAZINE 5-STAR REALTOR AWARD 2016 - 2013 MOST CLOSED LISTINGS – Wilton Office 2016, 2014 - 2012 MOST CLOSED SALES – Wilton Office 2016, 2015, 2014 HALSTEAD PROPERTY PRESIDENT’S COUNCIL 2013, 2012 & 2011 HALSTEAD PROPERTY DIRECTOR’S COUNCIL 2014 HALSTEAD – PLATINUM CIRCLE 2016 HALSTEAD - GOLD CIRCEL 2015, 2013 HALSTEAD – SILVER CIRCLE 2007 COUNTRY LIVING ASSOCIATES OUTSTANDING RELOCATION SPECIALIST PRESIDENT'S AWARD (2005, 2006 & 2007). Leading Real Estate Companies of the World PREMIER CLUB – SILVER AWARD FOR REFERRAL ACHIEVEMENT (2006) Sales Associates Recognition Program Professional Associations: · Connecticut Association of Realtors (CAR) · National Association of Realtors (NAR) · Consolidated Multiple Listing Service (CMLS) · Connecticut State-wide MLS (CTMLS) · Mid-Fairfield County Association of Realtors (MFCAR) · Senior Advantage Real Estate Council (SAREC) · Real Estate Buyer’s Agent Council (REBAC) · Seller’s Representative Specialist Council (SRS) · e-PRO Professional Designations: · BROKER · ABR (Accredited Buyer Representative) · SRS (Seller’s Representative Specialist) · RENE (Real Estate Negotiation Expert) · GRI (Graduate Realtor Institute) · RSPS (Resort and Second Property Specialist) · MRP (Military Relocation Professional) · SRES (Seniors Real Estate Specialist) · LRS (LeadingRE Relocation Specialist) · LSS (LeadingRE Sales Specialist) · LSE (LeadingRE Service Expert) · AHWD (At Home with Diversity: One America) · REALTOR e-PRO · CONNECTICUT TRUST FOR HISTORIC PRESERVATION