What is the difference between
“Pre-Qualification” & “Pre-Approval”?

 

A pre-qualification letter is an opinion, typically offered by a loan officer based upon
information usually given to the loan officer verbally.  Often the information is not
verified and most of the pre-qualification letters have a statement like this: 
“This opinion is subject to the information provided being verified, including income,
 assets and/or credit.”

 

On the other hand, a pre-approval is a loan commitment.  It is a loan approval that is based upon

documentation submitted during the application process and underwritten by someone who has

underwriting authority.  The “pre” merely means that the applicant has not purchased a home yet. 

Therefore, the commitment will be subject to these conditions:

• A sales contract on a property
• The appraisal of that property
• Final selection of a loan program and locking in a rate

In addition, all loan approval or commitments will have standard conditions such as a clear title

and hazard insurance.

 

I recommend that buyers start the home buying process by meeting with a loan officer

at either a bank or a mortgage brokerage firm.  During this preliminary meeting, the buyers

can ask a lot of questions and get a lot of answers.  The most important question is, “What price

range home should I be shopping for?”  To answer this, the lending professional will need to

know a few key things:

• Your household income, assets & liabilities
• Your FICO scores (credit scores) – with your permission, they can get this info
• Figure out the maximum monthly payment you can afford and are comfortable with paying. 
  This will include the principal, interest, taxes and insurance.
• Using the previous info…they can determine a list price range for you to give your agent.
• Now the lending pro can provide you with a “Pre-Approval” letter based on the information
  they have obtained.  This letter can be submitted WITH the offer on the home that you select!
• Now you can shop with confidence, knowing what price range you are qualified for and
  what the total monthly commitment will be.

I highly recommend Tony Parisi, a lending professional from Prospect Mortgage. 

He is superb at what he does and responds back to you VERY quickly!  You can reach him at:

Tony Parisi, Prospect Mortgage 1030 Foothill Blvd., La Canada CA 91011
818-482-0407 mobile
818-949-7870 fax