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Pre Qualifcation verses Pre Approval

Mortgage and Lending

Pre Qualifcation verses Pre Approval


Pre-qualification involves talking to a loan officer either in person or over the phone.

Try to stay away from cyber space loan officers.  The internet can be a valuable tool when shopping for a mortgage, but be extra careful when utilizing this source.  Many times you will be asked confidential information such as social security and account numbers.  Would you give this information out to a stranger on the street?  No. Think before you provide this information.  Remember you are not communicating with someone who you do not know and will probably never meet. You don't know where to find them if something goes wrong and false advertisement is rapid over the net.  These companies offer low rates but don't tell you the cost for the rates until it's sometimes too late. If a lender does not have a local office and is not willing to meet with you in person where you can sit down and talk face to face, you may choose not to deal with them on such a large transaction.  Find a lender that is will to sit down with you and answer your questions and explain the loan programs to you.


Once you begin working with your loan officer they can tell you the price range of home you should be looking for.  This is not a loan approval.


Information you will need to get pre-qualified for a loan:


•1)      Most recent pay stub

•2)      Last two years W-2's

•3)      A list of debts you owe, including child support, etc

•4)      The amount of down payment you have and the sources of these funds (i.e. savings, gift funds,

           sale of current home etc.


The loan officer will take this information and figure your debt ratio to determine the price range home that you should be looking at.


The loan officer can also determine what type of loan would be best for you base on this information


For a pre approval letter the loan officer would have to pull a credit report.

Most lenders require a minimum 620 score to qualify for financing.


To get a pre approval letter the loan officer must input the information provided on the documentation they received from you into an online underwriting system.


A pre approval offers you two distinct advantages:

1) It enhances your negotiation power with a seller as they know you are an approved homebuyer.  You can negotiate like a cash buyer.


2) It encourages a realtor to actively work for you as they know you are a serious, nullified homebuyer. 


Don't assume you can exceed your pre approved amount.  Many potential homebuyers find themselves getting caught up in the excitement of shopping for a home.  Suddenly they are shopping for a home that is beyond their price range.