Office of Loan Programs Pre-Approved vs Pre-Qualified
Janis Vega
August 1999
What is the difference between pre-qualified and
pre-approved?
A pre-qualification
letter is simply a cursory review of your financial situation while
a pre-approval letter shows that the lender has made a thorough
analysis of your income, assets and credit and has pre-qualified
you for a specified loan amount.
Why should I
get pre-approved?
In order to
get the best possible start in your home-buying process, it's best
to obtain a loan pre-approval before you actually start looking
for a home to purchase. A pre-approval from your lender shows that
you have a solid credit history and that you are qualified for
a mortgage loan of a specified size. In a competitive market, a
pre-approval letter can provide greater negotiating clout with
the seller, as well as provide assurance that your offer will have
priority above those who are not pre-approved.
What information
will I need to provide for a pre-approval?
Generally, the
lender will want you to complete a standard residential loan application
or, you just may be asked to provide the following documentation.
Also, the lender will order a credit report to determine if there
are any unusual or derogatory items in your credit history which
may require additional explanation
- previous
two year's history of your residence, employers & income
sources, and copies of W2 forms.
- copies of
the most recent three month's bank statements, verification of
stocks & bonds, and market value of any other real estate
owned.
The greatest
benefit to having a pre-approval letter is that it takes the stress
out of shopping for a home. You'll be able to concentrate upon
finding your dream house, without the worry of wondering if you've
met the lender's financial requirements.
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