Are you pre-qualified or pre-approved for a loan?
Before you begin to shop for a new home, we should meet and discuss your budget as well as a maximum monthly payment your comfortable with. This will put you in a better position as a buyer. That?s when it's important to understand the distinction between being pre-qualified for a loan and pre-approved for a loan. The difference between the two terms will be crucial when you decide to make an offer on a new home.

To get pre-qualified for a loan, I will collect information about your debt, income, and assets. We?ll look at your credit profile and assess goals for a down payment and get an idea of different loan programs that work for you. I will issue a pre-qualification letter outlining the amount you are pre-qualified to borrow based on the information you provide.  It is important to understand a pre-qualification letter is based on a review of the information you provide and an educated estimate of an amount you are eligible to borrow, not a commitment to lend.  Should we be unable to document any of the stated information the loan amount approved could be materially different.  

Getting pre-approved for a loan provides a competitive advantage when the time comes to extend an offer on a home because you have been approved for a loan with specific terms and conditions.  Sellers and their agents strongly prefer a pre-approval letter.  

To get pre-approved, we will complete a mortgage application and document income, assets and liabilities, often using an automated process.  If your financial situation is more complicated, we collect tax returns and financial records.  We?ll review your mortgage options and submit your application to the lender best meeting your needs. Once the lender has documented your information to their satisfaction, you will receive a pre-approval letter indicating the amount your lender is willing to lend for your new home, subject to things like appraisals, surveys and inspections which can't be completed until you've found a home.  If your financial situation changes (you lose your job), interest rates rise or a specified expiration date passes, your lender must review/update your request and recalculate your mortgage amount accordingly.