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Difference between USDA “pre-qualified” and USDA “pre-approved”

By
Mortgage and Lending with USDA / FHA Mortgage Source

This is a subject we have touch on in the past and many people still ask what is the difference? Many prospective homeowners hear these different mortgage terms (prequalified, preapproved, credit check, etc) and do not completely understand the difference.  Even many mortgage professionals rely on different interpretations, so it can be confusing.

The USDA loan application is the first step when you start the mortgage process.  Once your USDA loan application is complete, your mortgage specialist will do the following -

Pre-Qualification:

This is when your loan application is processed and your credit is also checked. The entire process typically takes around 30 min to complete.  At this time your debt to income ratios are calculated to determine the purchase price that you can afford. All the information you provide to the mortgage specialist is based on your word (income, job history, bank/asset information, etc) The only thing that can be 100% verified at this is point is your credit and debts, which is a critical part.  Assuming you are telling the truth, everything the mortgage specialist tells you should be accurate. Once this evaluation is complete, the USDA mortgage specialist can issue a letter of pre-qualification to you.

Pre-Approval:

Basically everything noted above. The key difference is all the information you provided on your USDA loan application is VERIFIED and checked at this point. During the USDA pre approval process your loan specialist will ask that you deliver all the documents needed for underwriting purposes.

Income - pay stubs, tax returns, etc.

Assets  - bank account statements, etc. 

Job/Rent history - verification.

ID - social security and drivers license.

Once all your paper work is received, your loan file will be reviewed and approved by the underwriter. At this point you will have a complete loan pre-approval. Keep in mind, your loan pre-approval still does not guarantee the USDA loan to you. Once you find the perfect home to purchase, there are many other important factors related to the actual home itself (not you) that need to be approved as well.  Items like the home inspection, home appraisal - these are very important "collateral requirements" that need to be approved as well.  Of course these requirements will not be satisfied until you have a completely executed contract on a home.

 Again, many mortgage professionals rely on different interpretations of pre qualified and pre approved. It really comes down the mortgage specialist. Either way, a properly trained USDA loan specialist will be able to foresee any potential issues well in advance and navigate through these items properly.

Interest in applying for a USDA home loan in Florida? Please visit our main web site by clicking here.

USDA Mortgage Source is Florida's leader for all 100% USDA / Rural Development home loans. Serving all of Florida including Lake county ( Mount Dora , Lady Lake , Clermont , Leesburg, Eustis ) and everywhere in between - please visit our main web site at www.UsdaMortgageSource.com or call 904.302.6060 to learn more about the 100% USDA / Rural Development home loans here in Florida. We are available to serve you seven days a week.

Comments (2)

John Saari
Worcester, MA
"The Mortgage Buddy"

Nice post. The focus needs to always be on the pre-approval not the pre-qual. A pre-qual is just a waste of time. Anyone can make up information on an application.

May 30, 2011 06:22 AM
Eric Crane -- Your Full Service, Discount Fee Realtor®
DPR Realty LLC - Gilbert, AZ
Greater Metro Phoenix Arizona

Thank you for an educational post and have a great Holiday,
Eric

May 30, 2011 06:30 AM