Real Estate Book: Question for Chapter 7-Screen Buyers

Q: I just received a pre-qualification letter from my lender. My Realtor told me that the letter needs to state that I’m pre-approved – not pre-qualified. Seems like semantics and more hoops for me to jump through. Is there really a big difference between being pre-approved and pre-qualified for a loan?

A: There is a huge difference in a loan pre-qualification letter and a complete loan pre-approval.
Loan pre-qualification is nothing more than taking a loan application, checking a buyer’s credit report and debt-to-income ratios to match loan program qualifying criteria.
A loan pre-approval is achieved when the buyer’s complete loan package with all required supporting documentation is submitted to a bank underwriter for conditional approval. The conditional approval may only require a satisfactory property appraisal and acceptable title report and insurance to complete the loan processing.

Tip-
“Pre-approval” is a misused term and often overstated by Realtors and mortgage brokers. A true loan pre-approval will have an expiration date and a list of any remaining funding conditions yet to be satisfied.
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