Home Buyers and Home Sellers should realize the Importance Of Pre-Approval For Home Buyers and Home Sellers.

The number one reason why home loans get denied during the mortgage process is that the borrower was not properly qualified
Loan Officers should realize the Importance Of Pre-Approval For Home Buyers as well as home sellers
Home Buyers depend on loan officers that once they are pre-approved, that they cannot just close on their loan but be able to close it on time

To this day, many loan officers do not realize the Importance Of Pre-Approval For Home Buyers and sellers and not thoroughly qualify a borrower before issuing pre-approval letters

Why Loan Officers Should Know The Importance Of Pre-Approval For Home Buyers & Sellers

A pre-approval letter is extremely important due to the fact that it is a great predictor that borrower will close on their residential mortgage loan

Whereas a pre-qualification is a mortgage loan originator’s prediction that the likelihood of getting mortgage approval is good and promising if everything checks out
Most real estate agents require that potential home buyers are armed with a pre-approval letter before they will show a property or let buyers make a written real estate purchase offer

What Is A Pre-Approval And How Do I Get A Pre-Approval Letter From A Mortgage Lender?

Pre-approvals are when lenders review the following when qualifying:

Assets
Debts
Credit report
Credit scores
Debt to income ratios
Qualified And Other income

Importance Of Pre-Approval For Home Buyers And the Mortgage Process

After reviewing the basics, the loan officer may require more documents for further review:

The mortgage loan officer may require to review the borrower’s tax returns
Business tax returns and 1099’s if they are self-employed or own their own business
This is to make sure that the income they are declaring after write-offs will qualify them
For borrowers with challenged credit scores or credit history or borderline debt to income ratios, the loan originator will most likely run the borrower’s application through AUS
Fannie Mae’s Automated Underwriting System is to make sure they get an approve/eligible per DU FINDINGS prior to proceeding with the file
How pre-approvals are issued depends on each individual mortgage company
Many loan originators issue pre-approval letters in a matter of less than an hour which is not highly recommended

Once a home buyer is armed with a pre-approval letter, he or she can go and make an offer to purchase a home.

What Is The Difference Between Pre-Approvals And Pre-Qualification?

Again, all lenders have their own policy on how they issue pre-qualifications and pre-approvals.

The number one reason for a last-minute mortgage loan denial and/or stress during the mortgage process is because a loan officer did not properly qualify the borrower
There is no reason for a loan denial or stress during the mortgage process if the borrower was properly qualified

Importance Of Pre-Approval For Home Buyers Versus Pre-Qualification

A pre-qualification is less formal than a pre-approval where the loan officer will just pre-qualify you whether you qualify for a mortgage loan.

The loan officer will ask borrowers the following:

Gross monthly income
Credit scores
Whether the borrower has a prior bankruptcy and/or foreclosure
Monthly debt
Assets

Most realtors do not give any weight on pre-qualification letters:

Most real estate agents want pre-approval before buyers can view homes and enter into a real estate purchase contract

Importance Of Pre-Approval And Why Do I Need To Get Pre-Approved Instead Of Pre-Qualified?

A pre-approval will determine how much of a home you can buy and what mortgage amount buyers will qualify for.

A pre-approval will also determine how much down payment will need including closing costs
A pre-approval will also tell borrowers how much monthly mortgage payments will be
Almost all realtors will not show a home unless buyers have a valid pre-approval letter from a mortgage lender
Sellers will not entertain any offers that you might offer
A pre-approval will determine what the term and the rate of mortgage will be
For those who do not qualify for a pre-approval, the loan officer can help borrowers with credit
So they can qualify in the very near future