Pre-Qualified, Pre-Approval or Underwriter's pre-approval when buying a Home?

by Kim Climer

You have decided it's time to buy a new home! In this current market most people are already aware that the first place to go is to their lender for a pre-qualification or pre-approval. But many don't understand the difference between the two.

Pre-Qualification is the first line in lender approval. It typically is free and can be done over the phone or online. Generally, you provide basic financial information and no credit is checked. The letter you receive merely states how much home you qualify to purchase. Most real estate agents will not show houses, much less go into contract with a pre-qualification letter.

Pre-Approval is the second and most common form of lender approval. With a pre- approval, the lender has pulled credit and gathered more information to determine credit worthiness and can say with near certainty that you qualify to purchase. This letter is what sellers want to see when a contract comes in on their house. A pre-approval is determined by the loan officer and must still go through underwriting. Only underwriters have the authority for final approval.

Underwritten {pre}approval is the least common, but the most efficient way to obtain loan approval. With this type of approval, your loan has undergone a complete underwriting review, is processed and is now subject to the appraisal of a home. Many lenders can have you completely underwritten in about two weeks. Once your loan has been processed and underwritten, you have the same buying power as someone with cash and this can shorten the closing time drastically.

It's important to note that just because you have a pre-approval letter, doesn't mean you will be approved for a loan. Many hearts have been broken weeks and even days before closing by a lender saying, "No" to their loan. This is why waiting just a couple of weeks to get that final underwritten approval is so important.

Your real estate agent can offer you valuable information during this process, but ultimately it is up to you, the buyer to decide on what lending institution you want to work with. It's important to talk to several and find one who is willing to take your loan through the full underwriting process before ever making an offer on a home.

As always, I am not an attorney, nor do I play one on Television. So I strongly encourage anyone who has questions about any contract or agreement, to seek the advise of an attorney.

If you are currently looking to purchase a home, you can read my blog  post about the buying process.

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Kim Climer, Realtor

Serving The Colony, Little Elm and surrounding areas.

Coldwell Banker Apex, #590914

Kim mobile: 214-542-1507

www.kimclimer.com

kim.climer@coldwellbanker.com