I get this question all the
time and it’s a good one. It’s very important if you are thinking of buying a
home to understand the difference and to know the process of both.
Understanding what is required of you early on will help you to adjust and have
the confidence you need to meet your goal of homeownership. Whether you plan to
purchase in a year or 30 to 60 days it’s a good idea to get your ducks in row
and plan. Set yourself up for success and know your obstacles in advance so you
can tackle them one at a time to meet your goals. If you have no obstacles
great! You are a rare bird, but great!
OK enough said the difference
between PreQualified and PreApproved?
PreQualified;
This procedure is done by looking at your credit, either a report
you may have or one I would pull on
your behalf. It is important you are
careful to not have too many inquiries on your credit report during this time.
So limiting the amount of times your credit is pulled is very important. You
would fill out the short version of the loan application. Than we would gather information from you, starting
with federal tax returns, current paycheck stubs and any other forms of income
documentation needed to average your income over two years. We would check all liabilities
either against the credit report
or a list given to us by you. This list of debts is only from creditors that
report to all three of the major credit reporting agencies. We are not
interested in debts like your electric, phone and other misc bills and living
expenses. Depending on how close you to purchasing we would ask for bank
statements for verify funds for down payment and reserves. We would verify employment.
But mostly we would run your income against your debts and come up with a debt
ratio and see if you were in line with Fannie Mae and Freddie Mac guidelines
for whatever type of loan you were going to be applying for with your purchase.
If your numbers were in line, I would then be able to tell you the dollar
amount you could qualify to purchase. I would also be able to give your Realtor
that amount and a letter for the same. This letter does not hold as much weight
as a Preapproval letter and is not a commitment to lend.
Most experienced Realtors
like to have their clients PreQualified before they start working with them.
Think about that for a minute, it makes perfect sense and very smart on their
part. Realtors spend a lot of time, energy, money and gas showing a buyer
property, sometimes this process can take months. Then to finally find a
property put in an offer, get under contract, open escrow only to find out the
buyer you’ve been working with for the past 3 or 6 months doesn’t qualify for a
loan…. Oh my gosh! Well let just say you don’t want to be that person!
PreApproved; or (NOLA) Notice of Loan Approval. This process takes prequalifying a step further and is
more defined. In this process we actually upload your information full
application and income docs to Fannie
Mae (DU) or Freddie Mac (LP) for an automated approval once we have this we
can submit to a lender and program of choice. We would get a written
verification of deposit for funds to close escrow and verification both written
and verbal for employment. With this done we can write a letter of approval
that your Realtor can submit with any offer and you are good to go. The
conditions for the loan at this point would be inspections, appraisal and your
final walk through of the property
.
To learn more about the Home
Ownerships visit my website and view the Video
I hope this information has
cleared this up and given you some insight on the difference between the two. . It is important to understand
that a pre-qualification letter is just an estimate of what you are eligible to
borrow, not a commitment to lend. Getting
pre-approved for a loan gives you competitive advantage when the time comes to
bid on a home because you have been approved for a loan for a specified amount.
Remember to start early in your
planning, you can never be too prepared.
Your comments are always
welcome and encourages, please follow my blog for more information and future
posts.
Roxy Redenbaugh
ACMC Loan Consultant
Branch Manager
808-637-0011
NMLS#269926
No comments:
Post a Comment