Pre-Qualification vs Pre-Approval

What is the difference between a mortgage pre-qualification and a pre-approval?

When information is provided verbally to a mortgage professional to understand the borrower’s eligibility for a loan, then the letter provided by the lender or mortgage broker is likely a pre-qualification letter. A properly conducted interview, by a responsible and experienced mortgage professional, can result in a pre-qualification analysis that is highly reliable and welcomed by the real estate community.

If, however, a borrower voluntarily agrees to provide additional supporting documents, such as paystubs, tax returns, or bank statements to the lender as part of the preliminary review, then many lenders will issue a pre-approval letter. Only a bank or licensed mortgage banker may issue a pre-approval letter: a mortgage broker does not have the authority to issue a preapproval in NYS. A best practice would be to verify that an automated underwriting system was used to issue the preapproval in addition to reviewing actual borrower documentation.

Perhaps more relevant than the type of letter issued is the care, thoroughness, and thoughtfulness of the qualification analysis. Do not underestimate the reputation of the mortgage professional and their lending institution. There are a few important pieces of information that should be included in any pre-qualification or pre-approval letter. These include:

  • A purchase price, loan amount, loan type & term and percent down payment
  • Borrower(s) name(s) and Co-borrower name(s) (as applicable)
  • Whether the purchase depends upon the sale of another property (known as a contingent sale or purchase)
  • Expiration date (how long is document valid)
  • Contact information for both the mortgage consultant & lender (including NMLS #)

One of the most important pieces is the trust established among the lender, borrower, and Realtor(s) involved in the purchase transaction. This trust, and the cooperative atmosphere it creates, can prevent untimely delays and disappointing outcomes.

© 2024 1st Priority Mortgage, Inc.. All Rights Reserved.
Contact Us| Privacy & Security| Accessibility| NMLS # 29600
NMLS #29600. Contact 1st Priority Mortgage, Inc. for mortgage products and eligibility. 1st Priority Mortgage, Inc. is a Licensed Mortgage Banker, New York State Department of Financial Services-License number LMBC 107183. The Connecticut Dept. of Banking Consumer Credit Division-License number ML-29600. The Florida Office of Financial Regulation-Division of Consumer Finance-License number MLD2477. The New Jersey Dept. of Banking & Insurance. The Pennsylvania Department of Banking and Securities as a Mortgage Lender-License number 104688. All lending products are subject to credit and property approval. Terms, conditions, and certain restrictions may apply on all programs. Interest rate and program terms are subject to change without notice. This is not a commitment to lend. Contact a 1st Priority Mortgage Consultant for full details. 6000 Sheridan Drive, Williamsville, NY 14221 (888) 500-9733.
McAfee SECURE sites help keep you safe from identity theft, credit card fraud, spyware, spam, viruses and online scamsMortgage Company Websites - Powered by Volly