Mortgage Pre-Qualification versus Mortgage Pre-Approval

Getting an initial Mortgage Pre-Approval BEFORE you speak with a Real Estate Agent just makes sense.

A good first step is to complete the online application, or speak with a Mortgages Unlimited loan officer who will help you determine what loan programs are available to you, how much home you can afford, what the payments might look like, and how much money you'll need to make it all work. This will ensure that you begin your search as an educated buyer, and can talk confidently with your Real Estate Agent about an appropriate home search.

Pre-Qualification

Mortgage pre-qualification is a quick assessment to determine whether your income, credit, and debt-ratio may fit current home mortgage loan programs, and provides you with a looks good estimated amount of what you may be able to borrow. A pre-qualification generally means a lenders has taken a basic application, reviewed credit, and gone over program options, but you have NOT supplied your supporting documentation for full review. No approval letter is given at this stage. There is no commitment to lend, and no interest rates can be locked or guaranteed. There are no obligations for an initial review of your qualifications.

Pre-Approval

Mortgage pre-approval is a full financial evaluation that involves applying for a mortgage, credit review, and an initial evaluation of your supporting documentation, including pay stubs, tax returns, bank statements, W2's, etc. Generally the lender will also run your application through the automated underwriting systems of Fannie Mae, Freddie Mac, FHA, VA, or even USDA to get a basic approval. An approval letter can be prepared and given to your Real Estate Agent at this time as a sign of confidence that you are a serious home buyer, and that a mortgage company has reviewed your information. A pre-approval letter is not a loan guarantee, but it shows there is a very strong likelihood of final loan approval.

FINAL UNDERWRITING

Final underwriting is when you've decided to move forward to actually get a loan. This means you've either said yes for your refinance, or you have a successful sales contract with a closing date (you bought a house). Before we can proceed, you need to sign the full application packet of documents. This includes the actual application, Good Faith Estimate, Truth in Lending, Appraisal Authorization, and an Intent to Proceed. An interest rate can now be locked and guaranteed.

Upon receipt of your signed application, the lender begins the full underwriting process, including ordering the appraisal, a title commitment, and putting your application in front of an underwriter for full review. You will need to pay for the required appraisal at this time. Most people put it on a credit card.

During the underwriting process, it is very common for the lender to ask for additional information. This is not a sign that there is anything wrong. Once the underwriter has been satisfied that your application meets all guidelines, your application will become Clear-to-Close.

Once your application is clear-to-close, your file still needs to go through a few more regulatory compliance verifications, finally being sent to the lenders closing department. These are the people who will prepare all the legal loan documents you will sign and closing, and who will send the money to the title company on your closing date. 

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