Buyers: The Difference between a Preapproval &
A Prequalification Letter
Preapproval means that the mortgage lender is ready to make you a loan based on the information and documentation (verification of income, debt, credit, tax returns, and available funds) you provided at the time you requested a preapproval. The preapproval will say how long it is valid for and may contain some other conditions for you to get your loan. Your lender may not require that you pay any fees, but will require the cost of a credit report.
Prequalification is a mortgage lender’s calculation of how much you could borrow based on information you supplied at the time of the inquiry. A prequalification does not mean you will get the loan, it simply is a guide based on what you provided. They are usually free and can be obtained on most lenders websites.
Below are a series of the most frequent questions asked by you the borrower and to your Realtor:
Do I need a preapproval letter or a prequalified letter?
Which letter gives me the best chance of acceptance of my offer?
Will the seller require this letter with my offer?
Will the REO/Owner require this letter with my offer?
Can I wait to get my approval after they accept my offer?
Will showing my ability to borrow more count against me?
How long is my approval good for?
Should I talk to more than one bank or have multiple letters?
Will having a low down payment hurt my chances of my offer?
Is it best to work with a named bank or mortgage broker?
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