South Orange County Blog from Bob Phillips

Pre-Qualification vs. Pre-Approval

Posted in Home buying, Home Selling, Mortgage Guidelines, Real Estate Tips by southorangecounty on April 1, 2013

Pre-Qualification vs. Pre-Approval

By Joe Anderson, Market Leader, Movement Mortgage

Pre-Qualification vs. Pre-Approval

Pre-Qualification or Pre-Approval?  Oddly enough some of our Real Estate/Finance community is not exactly sure what the difference is, or if it is of any value.  Well, we are now in a market where the Sellers’ are finding themselves in the catbird seat.  Several offers are being made on just one property, and the Seller is in a position where they can really scrutinize the offers being made.  Offers accompanied by lender letters that state: Must sell current home for down payment, Pre-Qualification letter stating that the credit was pulled and reviewed.  In most cases the Loan Officers are not even looking at compensation or asset statements. These types of letters are subject to practically all the contingencies and usually comment that it will need to be reviewed by an Underwriter.  The application will have to be underwritten! REALTORS® that are not quite sure of the subtle differences or able to distinguish one letter from the other are finding themselves asking better questions on the validity of the letter that they are receiving.  Is it worth the paper it is written on?

Typically these letters are directly from the Loan Officer that have possibly pulled credit, may have run an Automated underwriting engine, or even shared the information with a processor, but not Underwritten.  So, what is the main difference between pre-qualification letter vs. Pre-Approval?  Pre-Qualification is an Opinion vs. a Pre-Approval is Underwritten/Approved Buyer.  Some Realtor’s are still satisfied with an Opinion letter and will gladly accept these letters although there is a better alternative.

Now, that the market has started to make that shift, “Buyers Market” to “Seller’s Market,” ( I do not want to be the one to share or shake any one up, it is  my opinion of the changing market) does the Seller or Listing Agent have the same faith or confidence that this Opinion may hold up?  We are now finding ourselves educating our partners that if you have no other options, I would feel better having a great processor’s opinion vs. someone that may not have even pulled credit. Or better yet, have a fully underwritten application where all the credit docs are reviewed minus the Appraisal or Title. I would go with the later, and request an Approved Buyer.  You owe it to you client to bring the best possible viable offer to the table. My Opinion.


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