Thursday, March 24, 2011 - Article by: Michael Bardales - The Home Loan Group -
Who is the Winner in the battle of Prequalification Process vs Preapproval Process?
Here are my thoughts
Prequalification is a general method of qualifying a client for their maximum loan amount. The only requirement is a Loan Application and inputting the information into the Loan Origination System. The Loan Officer relies on the information given by the client to be 100% accurate. The Pre Qualification is pending review of income documents, proof of funds and an accurate credit report.
Here is my problem with pre-qualification: The information given by the client may be 100% accurate, however, the guidelines may offset their income and assets. This can cause big problems, especially if a Pre Qualification letter is submitted with the offer.
The Pre-Approval Process is the most accurate method of loan qualification. It is based on a loan application, an accurate credit report, reviewing income documents and proof of funds. Once the data is collected it is inputted into the Loan Origination Automated Underwriting System.
The system then runs the clients information along with Fannie Mae or Freddie Mac guidelines to compare all data. We then receive an "Approved/Eligible" response from the system and you got yourself a "Conditional Loan Approval"!
This is the best method and gives you a clear cut qualification for your home loan.
So....the Winner in this battle - Pre Approval Process.
It may be a lot to gather the needed documents in time for submitting an offer. Just remember the 1st step is Pre-Approval and the 2nd Step is Home Shopping.
Most Loan Officers have pushed away from Pre Qualification Process and are now only doing the Pre-Approval Process. Contact me should you need to get Pre Approved for a Home Loan!
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