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  • Kolton Morrison

Do I need to be prequalified or preapproved?

Updated: May 11

Tomato (American accent), tomato (British accent)? No. You need to be "preapproved." Being "prequalified" means you simply had a conversation with a loan officer about some basic information and a determination was made that you “should” be able to be approved for a loan. The conversation entails getting questions answered like how much income do you make, what other debts you have like credit cards and car payments, what credit score you think you have, etc. To be approved for a loan you need to meet certain guidelines. Your loan officer knows those guidelines and gets a good enough picture on whether you will be good to go or not.


A preapproval eliminates all doubt and gives you the confidence to put an offer on a home with certainty that you will qualify and close on your mortgage to purchase your home. There are still some factors like your inspections and appraisal that can hold things up but the items in your control are ready to rock.


Your preapproval letter is what your real estate agent wants before she or he gets you in their car to go see homes on the market. She or he will actually require it. It also is used in conjunction with the offer letter on a home to strengthen your offer.


The preapproval letter is furnished after you provide all the necessary information and documentation your loan officer needs to get you pre approved. Your credit will be pulled so that not only your score is determined to meet minimum score requirements but so all stones are overturned. It is needed to show that you have no bankruptcies, foreclosures, past due payments on debts, etc. If there are issues like that, “seasoning” guidelines will have to be met. Also with full transparency of all your other debts, your debt to income ratio can be calculated to ensure guidelines for that are met. To show for your income your loan officer will ask for W2’s and paystubs. If self employed then tax returns, profit and loss statements, bank statements, etc. are collected. Then assets will need to be shown for funds so it is know you have enough to cover the down payments, closing costs, prepaids like per diem interest and your escrow account to pay your taxes and insurance within your mortgage payment. These are a number of the items needed, so you get the picture that the preapproval is no joke. This is why once received, it is so empowering in your home search and it will actually make the process a lot more fun since any trace of doubt in any situation is simply no fun.


So if you are just starting to look into the idea of purchasing a home, the conversation with your loan officer about a prequalification should suffice for the time being. When getting close to being actually serious about buying a home, work with your loan officer to get that preapproval. It will save you time in the long run, avoid any initial issues and make the submission of your file to underwriting much faster when your offer is accepted. If and when you have any questions on anything, be a squeaky wheel and ask your loan officer anything and everything. She or he is there to help you accomplish goals and bring light into the dark room of the mortgage process. A lot goes into obtaining a loan but your loan officer is there to make it a smooth and positive experience.


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