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Pre-Qualification Letter vs Pre-Approval Letter vs Commitment Letter - Knowing the differences

a heavy question

WARNING - Common sense prevails here.....

Does this sound easy to answer? Which came first, the chicken or the egg? How about this question.... Do you know the difference between a pre-qual letter and a pre-approval letter? Both answers could differ greatly, depending on who you speak to and who is a professional on the subject matter and who isn't. I just wanted to dig a little deeper into this. There seems to be a major misunderstanding in my opinion.

You first need to read this post by Steve Kappre & the comments: Pre-Approvals that pack a Punch (or real Pre-Approvals) - He did an excellent job of doing a quick breakdown of what his pre-approvals consist of and how he operates. This prompted me to continue this discussion after reading some of the comments.

Pre-Qualification vs Pre-Approval

Keep in mind that these definitions/explanations are not from Webster or an online site, but that they are based on my opinions with 16 years in the mortgage industry.

Pre-Qualification Letter - The loan officer screens the borrower while asking questions and pulling their credit. I wrote a blog on the types of questions that I ask. Is pre-qualifying rocket science? Each loan officer has their own way of asking specific questions. I am not here to say which is right or wrong. But I will say that some of these questions are never asked in the initial screening process.

Pre-Approval Letter - There are a few ways to look at this. In my opinion, and from talking to a few seasoned loan officers; you should be collecting pay stubs, bank statements, and running a credit report. Depending on the type of work that the borrower performs, you might need W-2's and or tax returns. If it's a complicated pay history, then you need to order a VOE, verification of employment. This will tell the story of that borrowers' pay history for the last 2 years and their year-to-date.

Once the information is verified, you then run it through one of the different automated approval systems. Then the documents should be verified and reviewed by an underwriter. Now, here is where the debate comes into play.

By having an underwriter or a junior underwriter review these documents, you are essentially giving them a full approval. In Steve Kappre's case, he reviews the documents himself and then runs it through the automated system. Hey, I have no problem with this, because Steve is experienced and I know he knows what he is doing. Besides, Steve and I have spoken on several occasions. But from the technical word of Pre-Approval, essentially what this means is that you are approving the borrower without a property address. Let me ask any of you this. How would you define approval? Answer? Please leave me your answer below. Then what would pre-approval mean????

Commitment Letter - Now the fun begins and who said mortgages were boring. You can basically say that a pre-approval letter should be like a commitment letter. With a commitment letter, you already verified income, assets, and credit. There would be other conditions on the commitment letter though. If an appraisal has been done or not, that would be on there. Another condition would be for clear title and homeowners insurance. The rate and term would also be on this commitment letter.

As stated, this can be an interesting topic with varying answers. I am not saying that my statements are 110% correct, but I will be stern with my statements to say that I would love for anyone to debate them, to tell me that I am off base per se. Here is the reason why...

In order to offer a pre-approval letter without running the documents through underwriting and in some cases, not even asking for documentation upfront, but taking the word of the borrower (yes, loan officers actually do this), you need to be better than good. Even a good loan officer might miss these items, which could cause caos prior to settlement. Here are some of the items in question :

if you don't know how to read a pay stub in calculating their income - ie : if the borrower is paid twice a month and not every 2 weeks, the calculation is different. - 24 pay periods and not 26 pay periods.
or that you don't look at the details of the bank statements and didn't notice any large deposits, which need to be explained no matter what
or on the pay stub, you missed their child support payments
or not going over their credit line by line, but just assuming that their credit score fits the program, that you are okay....

Conclusion : Yes people, this happens more often than one would think. Loan officers such as Steve and myself are good enough to be able to hand out a pre-approval based on what we have asked and sometimes see. Hence why I tell most realtors that my pre-qualification letter is just as good as my pre-approval letter. If I don't feel comfortable with the debt-to-income ratios, then I run it through the automated underwriting system.

Overall, I would say many loan officers aren't experienced enough or knowledgable enough to give out a pre-approval letter, let alone a pre-qualification letter. Remember Houdini? Let's assume this, that I am a magician, that I think I am good and that I know what I am doing. Could I perform his underwater tricks while handcuffed and come out alive? I would bet not. The same thing with the average loan officer, who couldn't perform the same with a pre-qualification letter. People, the loan officer needs to know what they are doing and not just assume. Many questions aren't asked in the beginning. I know this after screening the borrower in which they have spoken to a few other loan officers. Yes, it's that scary and it's the truth. This is not to scare homebuyers, but to make them more educated. Again, please read my pre-qualification steps and match them with the other loan officer. If they don't ask 80% of these questions, it could be a rough ride. What questions should be asked when you are being pre-qualified for a mortgage? PS.. keep in mind, these are my opinions.

IMPORTANT QUESTION : Loreena Yeo asked this question - Question #14 about approvals - Yes, you can get an approval without having a property. You can still get a commitment letter without the property address. Hence my whole issue about pre-approval letters. In reality, it should be the same thing. It's more work for the lender, but it's official because an underwriter has reviewed all of the documents. I have done this and what is usually subject to verification is the appraisal and title work. Almost everything else has been verified and approved. The address on the commitment letter would have TBD, to be determined.

The problem with this step is that most lenders wouldn't go this far now, because many are 20 days in underwriting and 45 to 60 days to close a loan. But you know what, at Infinity Home Mortgage, we still underwrite loans without appraisals in some cases. If the file is ready for the underwriter, but we don't have the appraisal, we still turn it in. We will even underwrite an appraisal as we still process the loan. In tough times, you try to be proactive.

The difference between a Pre-Approval and a Pre-Qualification letter. - Another blog of mine on the same topic., just with a different twist and view.

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Posted by Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages - USDA loans on 07/16/2009 01:36 PM

Comments (39)

Pre-Qualifications vs Pre-Approvals in the Mortgage / Finance Channel

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Originally posted at: FHA Mortgage Expert - Tri-State Area - New Jersey/PA/Delaware: Pre-Qualification Letter vs Pre-Approval Letter vs Commitment Letter - Knowing the differences

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39 Comments on Pre-Qualification Letter vs Pre-Approval Letter vs Commitment Letter - Knowing the differences

JUL

Jeff - I'm ready to hear some more great answers, and varieties! Let the learning begin!

As an agent, there are two different perspectives from which I consider a pre-qual/appr/or whatever you want to call it. One is when I am working with the Buyer and one is when I am working with the Seller. When I am working with the Seller, then I will contact the Buyer's Lender to determine exactly what they have done to consider the Buyer to be pre-..... In many cases, questions must be asked about the house just as much as about the Borrower. For instance, are certifications required for example, for termites, the roof, and so on or, as is the case on many Baltimore properties, is there a concern with a ground rent. With so many Borrowers shopping on the internet, it is important to find out if the Lender is actually licensed to do loans in the particular state. When working with Buyers, it is important to know for what type of loan they have been qualified. They may be qualified for an FHA loan, but think that they can then buy any type of home that they like such as a fixer upper and not fully understand the implications of that type of purchase with that type of loan. It sounds like you do a thorough review before you give your qualification or approval, however I, also, believe that ongoing communication with the agent is key to having successful transactions.

That first line was cute Jeff. Needless to say...the loads of 'preapproval' letters flying around that aren't worth didley really irk me. A good loan officer doesn't run around flying around preapprovals unless they've done the work.

STEVE.... . again, I think you did a good job with your blog and how you do pre-quals. What scared me were some of the comments, that some seem to be misled on which is what or just the fact that the pre-qualification letter is more than just a piece of paper that so many fling around. So I just wanted to elaborate on this. thanks

RON.... . you bring up an excellent point about the whole process, something that I didn't cover. But this blog was too long for that part. I should have made this a part 1 and 2 of... which I might now do. So thanks.

But yes, we need to make sure that certain properties and property types are qualified. Example... if you tell me that you want to buy a condo, that is a red flag in today's market. There are several factors that go into this decision. When I qualify all my clients, this is one of the 10 questions that I do ask them. Here is my list of questions for a pre-qual. Please look at number 3.

Overall, you hit a nail on the head, that there needs to be an ongoing communication between all parties involved. This takes more work sometimes than others would know... hence why one reason that mortgages aren't easy, just spitting out a rate and saying... okay, next. Thanks for your thoughtful input and feedback.

SALLY.... . which line was that? That common sense prevails? Or which came first, the chicken or the egg? lol Seriously though, I would be very leery or scared if I was a realtor, when receiving these so-called pre-qual letters and pre-approval letters. And some of them look like chicken scratch. Hey, what's up with the chicken terms today... lol

Overall, I don't have a problem talking to the listing agent or the sellers agent, if they don't know me. I actually prefer it and will reach out to them both in any transaction, which kind of startles them, since many loan officers aren't to be found once the application is taken... lol thanks

Times they are a changing! Most people could get a loan from somewhere, if not one then they would just move onto the next. These days, if you can't get one you most likley will get none!

Bridget, you get the famed HOORAY FOR YOU!

You get it! YOU HIT THE NAIL RIGHT ON THE HEAD~!

Jeff, nice job here...we are beating dead horses now tho!

Ding- the fries are done!

D

Jeff,

I am a lot like Steve. I take a full application, gather all the documents, and pull credit. Once I have recviewed all the documentation and have calculated the income always on the conservative side of things. If I have one bit of doubt on the income stream or history or my ratios are a little high I then run it by an underwriter. If my ratios are in line and the job history and type is solid I issue a pre-approval. I wrote a post "Pre-approvals devalue like the dollar" originally here on Active Rain and then updated on my Blog site.

The definitions you have explained here I think are very accurate with some slight interpretation based on experience of the LO. Today's Market has created all types of different letters the banks themselves that own the properties want. Direct Lender approvals(I am a Broker), BofA approval, wells fargo approval, full approval subject to appraisal only I have been asked for.

Thank yo9u for the post. They are always well thought out and well written.

BRIDGET.... . yes, the times are changing... but this subject alone never really changed, it was just on how a loan officer presented this white piece of paper to both the realtor and to the borrower. I have seen trashy, crappy pre-qual and pre-approval letters before. And I have seen pre-approval letters and found out that the loan officer didn't even pull credit. It's just a shame that some loan officers have no clue or don't care, thinking that the paper will be good enough for now until they dig deep down later.

In regards to your statement, "These days, if you can't get one, most likely you won't get one." To me, that could be a dangerous statement. Just in 2008 alone, I closed 10 deals that were approved for a month, but they couldn't close them last minute. I closed all 10 of those. So those people were issued pre-qual letters, approval letters, and many even commitment letters, and they still didn't close. And this year, I have closed 3 or so that had been to a few lenders to try and get pre-qualified, yet they weren't qualified, but I was still able to issue them pre-qual letters. I guess it just comes down to knowing the basics, understanding what can be done and what can't.... and if unsure, to run it through the automated underwriting system. Just my opinion on that. thanks

DARIN.... . hey, can I have some of those fries? In regards to Bridget's statement, I did disagree a little though. Read my response to her, the 2nd part of it. That is just how I feel about it and maybe some of these borrowers just have bad luck in the first 2 that they would talk to, when it came to loan officers. Hence why no pre-qual letter. Again, just my opinion on that. And thanks for the polite compliment. I have no problem preaching to the choir, or as you stated, beating dead horses. I love to educate, just as you do. thanks

MATT.... . taking a full application is really not that hard or long. And I never thought of it that way, that my 10 questions is like taking a full application. I just do it in a different order than how the 1003 is laid out. But from what you explained, that is how it should be all of the time. If you have any doubt of anything, or how income is calculated, yes, take it to an underwriter. I do that or just have my processor look at it really quick, to get a 2nd pair of eyes on it.

Sure, my definitions might be a tad off from some loan officers. I would love for others to chime in and tell me if they have something completely different. But I think too many of the loan officers out there do what Steve and I do, yet they call it a pre-approval letter, yet they either missed an important question or miscalculated income. I see this often. I have have even seen where they didn't review credit correctly. And the main problem with this is, if they calculated income incorrectly, yet ran it through delegated underwriting and got an approval, it still wouldn't be an approval once the processor or underwriter got down with it. And that was one of the main things that I was trying to get across on this blog. And it was tough. I had to chop 300 words off just to get it close to 1,000, which was still a lot of words for a blog and for someone to read. Thanks for your input and feedback.

Hi Jeff! I JUST had this conversation today about pre-qual vs. pre-app! My line is, "Heck, anybody could give you a pre-qual letter!" You MUST start the process in sincerity and move forward so that your offer is strong and you're READY to go when your contract is ratified--with pre-approval!

Have a great Friday...

JUL

Jeff: Thanks for the clarification. It's all about time. My company has a standard letter they like us to send. We're fairly large and, sometimes, it's tough to talk to our underwriters as they're buried right now. You're right about how a good loan officer should be able to decide based on the facts whether a customer is qualified. Still, there are a tremendous amount of unknowns these days. Frankly, I'm hesitant to go too far (opening title, ordering an appraisal, e.g.) until I feel as if I have a real commitment from the borrower. On a purchase transaction, I do what the agent wants. They understand that things can change and, again, there should always be language in the letter stating that the approval is based on satisfying all the conditions. We live in a too-changing mortgage world right now. As nice and as complete as a loan commitment letter is, it doesn't mean the deal is going to happen. I appreciate your thoughts and opinions. I'm sure your clients can tell you're looking out for their best interests. Have a great day!

JUL

Hi Jeff, thanks for sharing! I am also a brand new loan officer of 1 year. All of this knowlege helps me in that aspect. I do love both fields, realtor, and loan officer. have a great day!

JUL

Pre-Qualification vs Pre-Approval--ever since I got licensed (1987)--the definition has always been the same, it just that in the past five years the definition has gotten distorted or confused.

JUL

DEBE..... I agree with you 110%. I just spoke to a borrower in Florida today, 7-20-09, that told me that she was pre-approved by another loan officer about 4 months ago. I started going over the difference and imagine this... he never collected any of her documents. hhhmmm... he just took her word for it. In my honest opinion, that is not a real pre-approval... sure, some of us can do this and get away with it, but technically it's called a pre-qualification letter. thanks

PAUL..... I don't think I ever said that in order to hand out a valid pre-approval, you have to order title and or an appraisal. But that I was trying to say that this would go on a commitment. In my opinion, a pre-approval is 2 short of the commitment, which would mention title and appraisal. Sure, some companies want this on their pre-approval letters, but in my opinion, this is still not what a pre-approval letter is all about. People just like to cover their ass. But I will agree, we don't want to do too much work, just to qualify someone or spend money... but we do need to be accurate about the basics. What is happening is that some realtors in my opinion are changing these terms in some cases and or demanding for better pre-approvals with more information. But in my opinion and almost 17 years, it's bs... both pre-qualifications and pre-approvals are pretty standard. No need for 1st and 2nd borns on the letter, just to make someone feel better... when it's all a bunch of words that anyone can make up. And when you push desperate people, such as a desperate loan officer, they will have the mind to lie or fabricate to a certain degree... just to get no flack in the beginning when handing out these letters. Again, just my .02 on this subject... but I bet if we did an accurate study, I bet I would be much closer to this than many would think. I screen so many, clients, loan officers, realtors... hang out with them and hear the loan officers stories. I would be scared about this. thanks

GINGER..... my pleasure and I hope I can help some in the near furture... I love teaching what I know and what I have learned... good luck with it and if you ever have any questions, never hesitate to ask.

AIDA.... well, I say some distortion of these definitions even in the late 90's... but you are absolutely correct, that this has become a very big issue in the last 5 years. .. hence why I decided to write about this and after I read the comments in Steve's blog, which I mentioned above. He wrote a good blog, it was those in the comments that just assumed. thanks

Jeff - My million dollar question is:

Can a buyer honestly receive an APPROVAL letter but just pending the property?

The way my loans for clients have gone seems that both buyer financing and property approval come hand in hand.

I want for my clients to get an approval letter. A Pre-approval is still not quite good enough.

Thanks for the information, Jeff. IMO though, in this economic time, there is no such thing as a Pre-approval until you get a clear to close. We all have had times where "something" has come up at the last minute or the underwriting has changed. I have had that happen even on the day of closing.

Jeff, I agree 100%! I have seen two pre-approved clients unable to get loans when the time came in the last month alone. In the menatime, both brokers, title, and both parties to the contract have done a lot of work and made plans for nothing. It can be a difficult experience.

I generally consider the pre-qualification & pre-approval letter to be one & the same. The commitment letter is provided by the lender & is the true loan commitment.

Regarding the comments that state that a pre-approval letter isn't good enough...they aren't working with the right loan officers - If I issue a pre-approval letter I'm 100% confident we can get the deal done & we DO.

Dan

What really worries me when looking at offers on my listings is the strength of the company signing the letter, assuming it is signed. When the market was hot, any buyer and any mortgage broker could do a loan. Now I am hearing stories about wholesale lines being pulled and brokers not being able to actually do a loan so will we be forced to accept offers from buyers with letters from local and/or nationally recognized places (Wells Fargo, etc.)?

What kind of questions should we be asking to the mortgage broker about the letter they've given us and when do we know to walk away?

Also something to look at in the Pre-Approval as well as a Final Committment letter is:

Committment is subject to "Dept/Income Ratios" not being altered Below qualifying ratios.

An example where the Seller tried to Sue the buyer for Specific performance, since they Did indeed have a Final Loan Committment Letter. Before the Closing the Buyers Job Opportunity fell through, yet the Loan Committment did Not have a Condition for Income being sufficient.....Thus, the Seller tried to sue to get the Buyer to have to proceed with Closing.
This will just help prevent one less head ache in the event an income loss in an amount necessary to qualify should happen to one of your buyers.

Kimberly

Thanks for sharing. One of the things we need to watch for is pre-approval for the correct mortgage product. We have buyers come in all the time with normal financing in mind. Then, they select a REO property that needs renovation financing such as 203(k). They are frequently surprised to find that their lender does not offer the needed product.

Great post, and the funny thing is I woke up this morning thinking about this very subject. I'm about to write a series of letters for agents to use for FSBO's and this seemed like a good subject to address.

After reading your post, it also occurred to me that this is a good point for a mortgage broker to use in marketing. With so many buyers (and agents and home sellers) being disappointed when a promised loan doesn't come through, I think being able to say your pre-approval letter has teeth would make you VERY popular with the agents in your community.

Keep up the good work!

Marte Cliff, Copywriter
writer@marte-cliff.com
www.marte-cliff.com

I know one is supposed to be better than the other. But it really depends on the lender. I do know I get tired of last minute issues that should have been cleaned up weeks ago.

Lenders need to order the Verification of Rent WITH the VOE. I can't count the number of times the lender leaves this until the last minute. For the last few years, I charge a forms fee for completing them ASAP because the lender did not order it with the original VOE...I suspect that had the VOR been ordered on many of the sub-prime borrowers who are now in foreclosure, more than a few would not have gotten their loans or been in the position of loosing their current homes.

Jay Spencer, you rule!

Jeff - great information for buyers and agents, I reblogged to share with my readers also. Thank you for sharing your knowledge :)

Jeff, I can't argue with your points. I would like to add, that we have a new "chupacabra" out there. (Google it, or watch the Tecate Beer commercial if you're not sure). That bogey man goes by the name of "investor overlays".

Even though you have an automated approval, doesn't mean you will make it to loan docs. For instance, DU will approve FHAs over 50% DTI, but try getting it past an underwriter. Conventional loans with less than 20% down and a DTI over 45% will also bite the dirt. Condos (in California at least) require at least 20% down because MI companies won't insure.

A good originator, not only knows how to review documents, he/she also knows the latest and greatest(?) on the investor overlays. I have actually been told by and underwriter "I don't care what DU says, "I DON'T LIKE THIS FILE!"

Thanks for starting this thread.

How about forcing the Lender to Escrow the funds so you can actually close on time?

I have a client who has Excellent Credit and had 2 PreApproval Letters and now the Lender keeps putting up road blocks. We've been forced to postpone closing and are on the verge of losing the whole deal.

The whole process is totally unreliable.

Maybe CASH ONLY CERTIFIED FUNDS WITH ALL OFFERS.

Jeff- I've been getting committment letters from lenders rather then pre-approvals... but as Greg Cook noted above the DU can be a real issue even for well qualified buyers with supporting income and reserves and a large down payment when you are looking at Jumbo loans.. It's a different world then it was even last year.

I know for certain that many LOs do not even have most of the documents you say they should when they issue a pre-approval, and then, when it actually coomes time to close, they cannot get an underwriter to approve the loan... big issues...

On the other hand, our buyer agents like to get pre-approvals for no more than the amount of the offer they are submitting, as they find this a good negotiating tool. It would be good to get teh max approval, and then have the LO modify it for the offers... would that become unduly expensive for the lending company?

Great discussion... I look forward to more of the comments as well.

Jeff,

Thanks for doing my next blog for me!

Our compliance department literally inteprets preapproval as a full underwriting of the file by an underwriter.

As you correctly point out, a thorough prequal in many cases by the right loan officer is worth more than a cursory preapproval from someone else. If the letter doesn't say "income and assets are verified, credit history reviewed, and run through an automated underwriting system" then it is not thorough enough for me.

Some things that trip up deals like never before:

1. Expiration of credit documents in 90 days (used to be 120). This may force credit to be run again which may disqualify borrowers whose scores are on the edge, or change their interest rate significantly. Borrowers need to know what to do and not do that will affect their credit after applying for a loan.

2. Many lenders now require another VOE within 48 hours of closing. With all the job losses these days, don't let your borrower change or quit jobs until after the closing.

3. Condos are tough to get approved with low down payments. Soon FHA spot approvals will no longer be possible. If your buyer is considering condos, work with a loan officer who knows the condo market in your area and is experienced with reading condo budgets and condo questionnaires. Even if your borrower can financially qualify for a loan, the condo may not be acceptable to the lender. A larger down payment can help reduce the potential for problems.

4. Even if the loan is prequalfied or preapproved, many MI companies have stricter guidelines for debt ratios than an automated underwriting system. So a conventional loan that gets an automated approval with a 50% debt to income ratio will, in most cases, not be eligible for private mortgage insurance. It may be necessary is to switch the borrower to a government loan program if they don't have enough down.

Great info. Thanks. As food for fodder, you might want to take the Zillow mortgage quiz.

Great information. I trust pre-qual letters only from brokers who I know has done what you do. True, sometimes things slip through but overall if they say they qualify for a home (discuss type, price, etc) then I know it will go through unless the buyer messes up (i.e. buy a car) prior to closing.

I'm going to copy & paste your blog into a handout for my buyers so that they know what to expect when they talk to one of my LOs & have all the documents ready for review. Again a very excellent post & very relevant in today's mortgage market.

Coming from a Realtor, this is great information to know. Keep sending the information!

I just wanted to thank everyone for their comments. I will try and get back to you all by tomorrow. Too much on my plate right now. thanks

I'm a source of fund originator and authorized to write a credit approval on behalf of the bank. I have stayed in the banking side of originating for this very reason over the last 15 years. Prior to that I was a Realtor for nearly 10 years.

I agree with most everything listed in criteria for an originator to review to make an educated prequalification - but if the loan officer is not authorized either directly from the source of fund lender or the lender's underwritier - its still just an educated prequalification. A broker/mortgage company is not the source of funds and end the end they don't have the authority. If they are a correspondent lender, on behalf of a specific bank - their internal underwriters can approve.

There is tremendous confusion in the industry of the specific capacities in Banker, Correspondent and Broker. A banker is typically source of fund originator and LO's will have varying levels of authority in credit approval. Most will have to go through underwriting of documentation for credit approval. A correspondent lender actually funds the loans in their company's own name with their own funds - writing loans that conform to the guidelines and standards of their purchasing lender.

Both Banker and Correspondent have internal ability to provide a credit approval in a timely basis. For a broker to provide a true credit approval - they will need to submit the loan to one of their wholesale lenders - and very little of this is actually happening in the market (some are requiring a submission fee without property) and the timelines are tremendous.

My personal philosophy has alsway been to be as close to the money as possible. We have swung to the other extreme end of the pendulum and everything is validated and audited to the extreme. I know its rough for agents as I'm seeing so much fallout on deals that should never have been entertained from the get go.

In order to go in with an offer and have the strongest buyer you must get the (full, what I call it) pre-approval. In a multiple offer situation why put yourself in a subordinate position? You also owe it to your buyers to suggest this so that they can actually purchase the house they want from a position of financial strength. First time buyers might not understand this.

JUL

Very nice post- Thank you Jeff for some clarity!

Jeff,

Your blog is dead on. I would consider myself a seasoned Loan Officer, as I have been in the industry for the last 7 years. I can calculate income, read tax returns and PRE-QUALIFY my clients with the best of them. My marketplace is Phoenix and many of the sellers are banks. Some banks doing short sales are now requiring a PRE-APPROVAL letter to execute the real estate contract because there is so much loan fall out. A PRE-APPROVAL requires an underwriting approval from an actual underwriter, not DU. This means we submit our clients full-package to an underwriter and get a PRE-APPROVAL and provide this to the listing agent in order to proceed with the contract. I do not have any problems doing this for the clients, and Realtors. It's actually a competitive edge for me, as we are currently 1-2 days in underwriting.

The problem with lumping these two definitions under the same category is that as a Loan Officer, we are not underwriters. Our daily job requirements cover more than just approving/declining loans, not to say that's all an underwriter does but this is their main function. Our objective is GETTING loans. I don't sit down every morning and review guidelines and loan packages ALL DAY. I don't review every single page of the banks statements to look for NSF charges or large deposits etc. I don't look at the buyer's address on his pay stubs, W-2's and bank statements to make sure they all match. I am not that detailed or analytical, otherwise I would not have more than 5 loans a month or I would be an underwriter. The people on my team do perform these functions but early in my career I didn't have help. This forced me to be more detailed than I currently am, but as a Loan Officer these things are not high payoff activities. This is why, I believe, so many Loan Officers don't perform the actions of an underwriter. I am not stating every Loan Officer doesn't do these things and that they shouldn't but rather that this isn't our main role. This is why I believe there are two different definitions, PRE-QUALIFY and PRE-APPROVAL.

JUL

With financing snags being such an issue with buyers, I don't have as much confidence with a prequal letter as I do with a preapproval letter.

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