Mortgage Pre-Qualification & Pre-Approval  

This article clarifies two terms borrowers often confuse - mortgage pre-qualification and mortgage pre-approval. 

 

Pre-Qualification 

A pre-qualification will give you a general idea of the mortgage loan amount you qualify for. It is an excellent tool for someone in the preliminary stage of taking action such as first time home buyers and those thinking about "moving-up". It's easy and quick to get pre-qualified. 

 

A pre-qualification is based on your income, credit, total debt ratio (total long term debt compared to the value of what the loans are for). For those considering a refinance or home equity loan the value of the property is also a factor.  

 

You will get an educated assessment of the loan amount you will likely qualify for from your loan officer. Sauk Valley Bank offers a free, no-obligation consultation in person or by phone with a lending expert.  

 

Pre-Approval 

A pre-approval gives you an accurate indication of the loan amount you qualify for. A pre-approval is based on validation through documentation, property value and stated loan terms including the type of loan, interest rate and program. Getting pre-approved involves completing some paperwork, takes a few days longer to get and carries more weight than pre-qualification. 

 

Pre-Approval is for the more serious shopper who may be working with a real estate agent in search of a home. Most agents require a pre-approval letter from your loan officer before showing you homes. It assures sellers you are serious and can qualify to purchase their home. It gives your real estate agent more bargaining power when more than one offer is submitted on a home you put an offer on. It's a form of security for both you and the seller. 

 

Your documentation including your current income, credit and total debt-ratio status is given to an underwriter and submitted through automated approval engines. Once an approval answer is received from either of these engines the borrower is approved subject to your employment and credit status during the application process, and also subject to a satisfactory property appraisal and title report. Any misrepresentation in the loan application or adverse change in financial position may void a pre-approval.