Credit Pre Approval: Pre-Qualification Process

Credit Pre Approval: Pre-Qualification Process

As a general rule Pre-qualification is a real simple piece of paper from a loan person stating you are pre-qualified based on some of what they heard to get a loan on a property. The paper it’s written on and that opinion aren’t worth much and the reason is not that much research has been done on your behalf to see that you truly can qualify for a specific lender.

A Pre-approval on the other hand should be a little bit more solid. Some loan officers write Pre-approvals and don’t take them that serious, others take them very seriously. Most Pre-Approvals will stated that a borrower is approved for a loan with some conditions. Those conditions are usually stuff like, no changes in what the buyer told them, and also verification
of income, assets, employment, down payment, etc. What they are saying is if everything checks out and doesn’t change from they were told then it’s pre-approved. Hopefully a loan officer has even gone as far as submitting a 1003 form and other basic info to a specific lender and under writer for some kind of approval. Sometimes the approval is quick manual approval, often in the technology age it’s simply a computer generated pre-approval. Those use to mean something, but they mean a little less these days with the lenders changing loan programs and tightening standards, but that computer generated pre-approval is far better than just a pre-qual letter. There are different types of computer model systems that offer the approvals. AT the time of this writing a popular one is D/U which is Desktop Underwriter program.
There are other ones, I believe another one is Loan Originator, I have to check on that.

Many agents who have been in the business for a long time, are skeptical when they hear the words pre-approved. An agent with years of experience may ask a lot more questions, to see how much time and how far along this loan person has really spent with this buyer. The term pre-qualified and pre-approval is thrown around too loosely these days. In the loan officers defense though since about Feb of 2007 when the subprime collapse began, lenders have often not stuck to what they advertise, so loan officers have had to watch lenders change their programs and terms often.

Once a loan officer has verified a lot of the assets and has a specific lender in mind and has read their qualifying info, then I would take the pre-approval more serious. After the loan is submitted you will want to find out what the “stips”(conditions) are the lender will ask for before granting the loan. Once the loan has been submitted and you get the conditions back, this is often called “conditionally approved” meaning you can get a loan contigent on providing this info and completing it. Most of the times it’s small stuff and doable, sometimes it’s not. What I have been seeing more in 2008 that I didn’t hear about before is when you submit for certain doc type like stated loan, and after all the work the lender last minute counters with “full doc”.

Just remember the more info you provide and the more experience and the better the loan officer, the more that pre-approval means, the more accurate it is likely to be. To get in touch with a loan officer please email me ron@minnesotainvestors.com

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