The differences between the steps to mortgage approval

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By Birgit Stubblefield


Question: What are the differences between mortgages pre-qualification, pre-approval and final loan approval?

Answer: A pre-qualification is the first and very preliminary step to find out how much you can spend on your new home and what estimated payments may be. It will let you know what loan programs are available and how much payment you may need.

Typically, this is based on verbal information provided to a lender. The lender will ask you about your employment, income, assets and rent history, etc. With pre-qualification this information has not been verified. Pre-qualification is a very useful tool and will assist you in the first stage of searching for your new home.

Pre-approval indicates that a loan officer has reviewed your pay stubs, W-2s, tax returns, bank statements, etc. and that you are qualified to borrow the amount indicated on the pre-approval letter, subject to review by a lender. The pre-approval letter lets you shop with confidence. Often, a pre-approval letter submitted with your offer is more attractive to a seller. It indicates that you have talked to a lender, you are a serious home buyer and the odds of obtaining a home mortgage are good.

Neither a pre-qualification nor a pre-approval are a commitment to lend. Additional requirements, such as a sales contract, an appraisal, inspections and additional information may be required and are subject to review by a lender. Once reviewed and approved, a final approval will be issued and your loan can fund.

Next week's question: Can I convert my 401(k) directly to a ROTH IRA?


Birgit Stubblefield is loan officer, Century Mortgage Company, NMLS#38658. The information and advice given by the authors of this column and distributed by The News-Enterprise are meant to educate members of this community. They are summaries of the panelists’ understanding and interpretation of some of the current laws and regulations and are not exhaustive. Readers should consult their financial or tax adviser for advice and information concerning their particular circumstances.