Sunday, August 25, 2013

Difference between Pre qualification and Pre Approval

Pre-Qualification

The estimation of your borrowing power from a lender and can be accomplished with a simple phone call.

Pre-Approval

A written commitment issued by a lender after a comprehensive analysis of the creditworthiness of the applicant, including verification of income, resources, and other such matters as is typically done as part of a normal credit evaluation program.

Which is better?

The pre-approval is a more complete and formalized process where the borrower actually meets
with the lender and supplies him with the last 2 years income tax returns, bank statements,
W2’s, etc. The lender asks about employment and runs a credit report. A pre-approval helps
take the guesswork out of buying. There is a firm figure that you, the purchaser and seller can
work with in confidence. Securing the commitment from the mortgage company is much closer
to reality with a pre-qualification than with a pre-approval - which is of tremendous benefit during
deal negotiations. By speaking with a lender, affordability parameters and appropriate loan
programs are identified. Details such as the amount of cash required to close are also
determined which is essential information for the purchaser of the property.