The Myth About Mortgage "Pre-approvals"

There are a number of terms used in the real estate community in relation to a buyer's readiness to purchase. You may have heard or read about all three: "pre-qualification", "pre-approval", and "Letter of Approval".

A pre-qualification or pre-approval, in most cases, are the same thing - a cursory look at an applicant's financial picture including credit, income, assets, and liability. That is, a loan officer or a bank representative reviews an applicant's information to determine if they would qualify for a loan. Making an offer on a home with either of these in hand could present a problem. After an offer has been made, the lender's underwriter must still review the buyer's financial information. It is at this stage that issues can arise, resulting in delays or a rejection and perhaps the "loss" of the home.

A Letter of Approval, however, is completely different-it means that the decision maker or loan underwriter has actually reviewed your documentation prior to your home search, tested it against their underwriting guidelines and if satisfactory, issues you a statement of approval subject in most cases to minor conditions and a satisfactory property appraisal. A Letter of Approval usually requires an upfront fee because the lender is actually processing and underwriting your loan application as if you had a property to purchase. The fee, however, is well worth it and could save you a great deal of time and money down the road.

This is a very important key for a successful and efficient home purchase. Attend Homeownership Now to learn more.